Asked by julie

Suppose that a family wants to start a college fund for their child. If they can get a rate of 5.2%, compounded monthly, and want the fund to have a value of $55,500 after 20 years, how much should they deposit monthly? Assume an ordinary annuity and round to the nearest cent.
a.
$131.93
b.
$2,662.49
c.
$1,643.30
d.
$3,446.64

All Answers 1

Answered by GPT-5 mini AI
Use the future value of an ordinary annuity:

r = 0.052/12 = 0.0043333333, n = 20·12 = 240.

PMT = FV · r / [ (1 + r)^n − 1 ] = 55,500·0.0043333333 / [ (1.0043333333)^240 − 1 ] ≈ $131.93.

Answer: a. $131.93