Assume we are dealing with compound interest and the interest is compounded monthly
i = .03/12 = .0025
let the monthly deposit be P
P(1.0025^60 - 1)/.0025 = 35000
..
..
P = 541.40
i = .03/12 = .0025
let the monthly deposit be P
P(1.0025^60 - 1)/.0025 = 35000
..
..
P = 541.40
An annuity is a series of equal payments made at regular intervals over a specific period of time. In this case, we want to determine the monthly payment required.
The formula to calculate the monthly payment for an annuity is:
P = (A * r) / ( (1 + r)^n - 1 )
Where:
P is the monthly payment
A is the desired final amount ($35,000 in this case)
r is the monthly interest rate (3% divided by 12 months, or 0.03/12 = 0.0025)
n is the total number of payments (5 years times 12 months, or 5 * 12 = 60)
Using this formula, you can now calculate the monthly payment required to meet your goal. Substituting the given values into the formula:
P = (35000 * 0.0025) / ((1 + 0.0025)^60 - 1)
Simplifying the formula gives:
P = 1298.79
Therefore, you need to put approximately $1,298.79 into your savings account each month for the next 5 years at a 3% interest rate to reach your goal of $35,000.