You want to purchase a new car in 8 years and expect the car to cost $21,000. Your bank offers a plan with a guaranteed APR of 5.5 % if you make regular monthly deposits. How much should you deposit each month to end up with $21,000 in 8 years?

Question

You want to purchase a new car in 8 years and expect the car to cost ​$21,000. Your bank offers a plan with a guaranteed APR of 5.5 % if you make regular monthly deposits. How much should you deposit each month to end up with ​$21,000 in 8 ​years?

You should invest ​$_____ each month.

Reiny · Answer

Assuming your interest rate of 5.5% is compounded monthly to match the payment period,
i = .055/12 = .0045833..
n = 8(12) = 96
monthly payment --- p
p(1.00458333..^96 - 1)/.00458333... = 21000
solve for p

You want to purchase a new car in 8 years and expect the car to cost ​$21,000. Your bank offers a plan with a guaranteed APR of 5.5 % if you make regular monthly deposits. How much should you deposit each month to end up with ​$21,000 in 8 ​years?

You want to purchase a new car in 8 years and expect the car to cost $21,000. Your bank offers a plan with a guaranteed APR of 5.5 % if you make regular monthly deposits. How much should you deposit each month to end up with $21,000 in 8 years?