Question

you can afford monthly deposits of $220 into an account that pays 3.6% compounded monthly. How long will it be until you have $6,000 to buy a boat?

Type the number of months____

(round to the next-higher month if not exact)

Answer 1

Future Value of an Ordinary Annuity
= C*[(1+i)^n-1]/i
Where,
C= Cash Flow per period =$220
i = interest rate per period =3.6%/12 =0.30%
n=number of period =
60000= $220[ (1+0.003)^n -1] /0.003
60000= $220[ (1.003)^n -1] /0.003
60000/220 =[ (1.003)^n -1] /0.003
272.727 =[ (1.003)^n -1] /0.003
272.727*0.003 =[ (1.003)^n -1]
0.8181 =[ (1.003)^n -1]
n =26.25
Therefore number of months = 27 months