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It is a classic Ordinary Annuity saving plan. The general formula is
FV = ,
where FV is the future value of the account; P is the monthly payment (deposit); r is the monthly percentage yield presented as a decimal;
n is the number of deposits (= the number of years multiplied by 12, in this case).
From this formula, you get for for the monthly payment
P = . (1)
Under the given conditions, FV = $100,000; r = 0.05/12; n = 18*12. So, according to the formula (1), you get for the monthly payment
P = = $286.37.
Answer. The necessary monthly deposit value is $286.37.
Note that of projected $100,000 the total of yours monthly payment deposits will be only 18*12 times $286.37, i.e. 18*12*286.37 = 61855.92 dollars.
The rest is what the account will earn/accumulate in 18 years.
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On Ordinary Annuity saving plans, see the lessons
- Ordinary Annuity saving plans and geometric progressions
- Solved problems on Ordinary Annuity saving plans
in this site.