Question

Francisco wants to raise $ 250,000 in 4 years and to achieve this he decides to deposit in a bank account a fixed amount of money each month due, at an interest rate of 10.4% capitalizable monthly. If the bank increases the rate to 11.2% capitalizable each month once deposit number 30 is made, what amount must be deposited the rest of the time to collect the desired amount?

Answer 1

First we compute the amount required to be deposited each month initially

Using financial calculator
Input: FV= 250000

N = 4*12 = 48

I/Y = 10.4/12

Solve for PMT as -4222.11

next we compute the FV after 30 deposits

Using financial calculator
Input: PMT = -4222.11

N = 30

I/Y = 10.4/12

Solve for FV as 143,947.08

Now we compute the deposits required at the remaining period

Using financial calculator
Input: PV = -143947.08

N = 48-30 = 18

I/Y = 11.2/12

FV = 250000

Solve for PMT as -4094.65

Hence deposit = $ 4094.65