Asked by Aly
Mary would like to save $10 000 at the end of 5 years for a future down payment on a car. How much should she deposit at the end of each week in a savings account that pays 12%/a, compounded monthly, to meet her goal?
d. Determine the weekly deposit without technology.
Can someone provide me with the formula please?
d. Determine the weekly deposit without technology.
Can someone provide me with the formula please?
Answers
Answered by
Damon
That is called a sinking fund
Since it is compounded monthly do it all monthly and divide the deposit by 4 to get the weekly figure.
S =D [ (1+r)^n -1 ] /r
S is what we need at the end, in this case 10,000
D is the monthly deposit (remember divide it by four for weekly)
n is the number of compounding periods, in this case 5*12 = 60
r is the interest rate (decimal) at each compounding period, in this case .12/12 = .01
so
10,000 = D[ 1.01)^60 -1 ] / .01
10,000 = D (0.817)/.01 = D (81.7)
D = 122.44
D/4 = $30.61 per week
Since it is compounded monthly do it all monthly and divide the deposit by 4 to get the weekly figure.
S =D [ (1+r)^n -1 ] /r
S is what we need at the end, in this case 10,000
D is the monthly deposit (remember divide it by four for weekly)
n is the number of compounding periods, in this case 5*12 = 60
r is the interest rate (decimal) at each compounding period, in this case .12/12 = .01
so
10,000 = D[ 1.01)^60 -1 ] / .01
10,000 = D (0.817)/.01 = D (81.7)
D = 122.44
D/4 = $30.61 per week