Aaliyah is saving money and plans on making monthly contributions into an account earning a monthly interest rate of 0.7%. If Aaliyah would like to end up with dollar sign, 34, comma, 000$34,000 after 4 years, how much does she need to contribute to the account every month, to the nearest dollar? Use the following formula to determine your answer.

Answer 1

The formula to calculate the future value of regular monthly contributions is:

FV = Pmt * [(1 + r)^n - 1] / r

Where:
FV = future value (in this case $34,000)
Pmt = monthly contribution
r = monthly interest rate (0.7% or 0.007)
n = number of months (4 years = 48 months)

Now plug in the values into the formula:

$34,000 = Pmt * [(1 + 0.007)^48 - 1] / 0.007

$34,000 = Pmt * [1.3486 - 1] / 0.007

$34,000 = Pmt * 0.3486 / 0.007

$34,000 = Pmt * 49.8

Pmt = $34,000 / 49.8

Pmt ≈ $682.73

Therefore, Aaliyah needs to contribute approximately $682.73 every month to reach her goal of $34,000 in 4 years.