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The Jones want to save $68,000.00 in 7 years for a down payment on a house....

The Jones want to save $68,000.00 in 7 years for a down payment on a house. If they make monthly deposits in an account paying 4% compounded monthly, what is the size of the payments that are required to meet their goal?

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Answer #1

Amount that is to be saved after 7 years or Future value of all the monthly savings = $ 68,000

Time = 7 years

Rate = 4%

Let monthly savings be = R

Because payments are made monthly,

Number of times savings are made, n = 7*12 = 84

Effective rate, i = 4/12 = 0.34%

Using FVIFA formula,

FV =

Putting values in above formula,

68000 = R[(1+0.0034)^84-1]/0.0034

68000 = R (97.0340)

R = 68000/ 97.0340

R = 700.78

Size of monthly payments that are required to meen their goal is $ 700.78

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