Question

On June 1, 2020, a person needs $17750. The person will make equal monthly deposits to an account which earns 8% compounded monthly. If the first deposit is made on June 1, 2010 and the last deposit is made on May 1, 2020, find the size of the required monthly deposits (rounded up to the next cent) in order to have the $17750 on June 1, 2020. $

Answer 1

Future Value of an Annuity Due
= C*[(1+i)^n-1]/i] * (1+i)
Where,
c= Cash Flow per period
i = interest rate per period =8%/12 =0.6666667%
n=number of period =10*12 =120
$17750= C[ (1+0.0066666667)^120 -1 /0.0066666667] * (1 +0.0066666667)
17750= C[ (1.0066666667)^120 -1 /0.0066666667] * 1.0066666667
17750= C[ (2.2196 -1 /0.0066666667] * 1.0066666667
C =$96.38
Correct Answer = $96.38