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Jeannie is saving up to make a down payment on a new car. She currently has...

Jeannie is saving up to make a down payment on a new car. She currently has $1,800 in a savings plan that pays interest at the end of every month with an interest rate of 3% compounded monthly; however, she needs at least $5000 for the down payment. If Jeannie can save $166 at the end of every month, then the number of months it will take her to accumulate $5000 is...

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Answer #1

Current saving = $1,800
Monthly saving = $166
Desired sum = $5,000
Annual interest rate = 3%
Monthly interest rate = 0.25%

Let it will take n months to accumulated the desired sum

$1,800 * FVIF(0.25%, n) + $166 * FVIFA(0.25%, n) = $5,000

Using financial calculator:
I = 0.25%
PV= -1800
PMT = -166
FV = 5000

N = 18.36 or 18

So, it will take 18 months to accumulate $5,000

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