You intend to create a college fund for your baby. If you can get an interest rate of 6.8​% compounded monthly and want the fund to have a value of 145,157 after 19 years, how much should you deposit each​ month? Round to the nearest cent.

Answer 1

We can use the formula for the future value of an annuity:

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

where FV is the future value, PMT is the monthly deposit, r is the annual interest rate, n is the number of compounding periods per year, and t is the number of years.

Plugging in the given values, we get:

145157 = PMT * [(1 + 0.068/12)^(12*19) - 1] / (0.068/12)

Solving for PMT, we get:

PMT = 145157 * (0.068/12) / [(1 + 0.068/12)^(12*19) - 1]

PMT ≈ $292.14

Therefore, you should deposit approximately $292.14 each month to reach a college fund value of $145,157 after 19 years, assuming an interest rate of 6.8% compounded monthly.