Question

Howard is saving for a holiday. He deposits a fixed amount every month in a bank account with an EAR of 14.7%. If this account pays interest every month then how much should he save from each monthly paycheck in order to have $15,000 in the account in five years' time? Select one: O a. $352 O b. $308 O c. $220 O d. $175

Answer 1

1)

APR = [(1+EAR)^(1:n)-1]xn n is number of compounding per year APR 13.79% =((1+14.7%)^(1/12)-1)*12

Deposit in each month (P) FVA:(((1+r)^n-1]=r) Here, 13.79% 12 A Interest rate per annum B Number of years C| Number of payments per per annum A:C Interest rate per period (r) BxC Number of periods (n) Future value of annuity (FVA) 1.15% 60 15,000 $ Deposit in each month (P) 175 15000:-(((1+1.15%)^60-1):1.15%)

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