Chloe is saving money and plans on making monthly contributions into an account earning a monthly interest rate of 0.675%. If Chloe would like to end up with $17,000 after 6 years, how much does she need to contribute to the account every month, to the nearest dollar?

Answer 1

To find out how much Chloe needs to contribute every month, we can use the future value formula for compound interest:

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

Where:
FV = Future Value ($17,000)
Pmt = Monthly contribution
r = Monthly interest rate (0.675% or 0.00675)
n = Number of months (6 years * 12 months/year = 72 months)

Substitute the values into the formula:

$17,000 = Pmt * [(1 + 0.00675)^72 - 1] / 0.00675

$17,000 = Pmt * [5.78771 - 1] / 0.00675
$17,000 = Pmt * 4.78771 / 0.00675
$17,000 = 709.9 * Pmt
Pmt = $17,000 / 709.9
Pmt ≈ $23.95

Therefore, Chloe needs to contribute approximately $24 every month to end up with $17,000 after 6 years.