1) (3 pts) Bob would like to have a total savings of $30,000 in 6 years...

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1) (3 pts) Bob would like to have a total savings of $30,000 in 6 years to use as a down payment on a future house purchase. He has no money saved up now, but plans on depositing $350 per month at the end of every month to save for this goal. What is the periodic interest rate Bolb must earn to reach his goal? What is the Annual Percentage rate? FVr I Periodic #

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Answer 1

Answer #1

Desired sum = $30,000
Monthly deposit = $350
Number of deposits = 72

Let monthly interest rate be i%

$30,000 = $350 * FVIFA(i%, 72)

Using financial calculator:
N = 72
PV = 0
PMT = -350
FV = 30000

I = 0.48%

Periodic interest rate = 0.48%

Annual interest rate = 12 * 0.48%
Annual interest rate = 5.76%

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Answer 2

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