Question

Use the savings plan formula to answer the following question. Your goal is to create a college fund for your child. Suppose you find a fund that offers an APR of 7 %. How much should you deposit monthly to accumulate ​$87,000 in 14 ​years?

Answer 1

The Savings Plan Formula is:

Here

A = Accumulated Savings Plan Balance = 87,000

PMT Regular Payment Amount = To be found

APR = Annual Percentage Rate = 0.07

n = Number of payment periods per year = 12

Y = Number of years = 14

Substituting, we get:

So, we get:

So

So,

Amount of money we should deposit monthly to accumulate ​$87,000 in 14 ​years = 304.55

So,

Answer is:

304.55