Question

QUESTION 1

An investment that will give you monthly payments for 8 years costs $132,087. If your required return is 9.84%, what is the monthly payment?

QUESTION 2

You will invest $133 per month. If the rate is 7.85%, how much will you have in 13 years?

Answer 1

Dear student, only one question is allowed at a time. I am answering the first question

1)

For calculating the monthly payment, we need to calculate the Equated Monthly Installment ( EMI )

EMI

= P x R x [( 1 + R ) ^ N] / [( 1 + R ) ^ N – 1 ]

Where,

P = Principal = $132,087

R = Monthly rate of Interest

= Yearly rate / 12

= 9.84 / 12

= 0.82% or 0.0082

N = Number of months

= Number of years x 12

= 8 x 12

= 96

So, EMI

= $132,087 x 0.0082 x [ (1.0082 ^ 96)] / [ ( 1.0082 ^ 96) – 1]

= $1,083.11 x 2.190194 / 1.190194

= $1,993.14

So, the monthly payment is $1,993.14