Question

You want to purchase a new car in 6 years and expect the car to cost $94.000. Your bank offers a plan with a guaranteed APR of 55% if you make regular monthly deposits. How much should you deposit each month

to end up with $94.000 in 6 years?

Answer 1

Monthly deposit= $1,120.81

Explanation:

Giving the following information:

Future value= $94,000

Number of periods= 6*12= 72

i= 0.05/12= 0.0042

To calculate the monthly deposit, we need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

Isolating A:

A= (FV*i)/{[(1+i)^n]-1}

A= (94,000*0.0042) / [(1.0042^72) - 1]

A= $1,120.81