Question

Sarafina is making monthly payments into an annuity. She wants to have ​$200 in the fund to buy a new convection range in six ​months, and the account pays 9.6​% annual interest. What are her monthly payments to the​ account?

To have $200 in the fund in six months, her monthly payments must be $_______?

(round to the nearest cent)

Answer 1

First, we have to convert the annual rate to the monthly rate:

Monthly rate = Annual rate / 12

= 9.6% / 12 = 0.80%

Now, we can use the future value of the annuity formula to find the monthly payment.

Where,
FVA = Future Value of Annuity
A = Annuity
i = monthly rate of interest in decimal form (0.80% = 0.008)
n = number of periods or months

Therefore,

Therefore, to have $200 in the fund in six months, her monthly payments must be $32.67