SOLUTION: Mitch is tired of renting and decides that within the next 5 years he must save $25,000.00 for the down payment on a home. He finds an investment company that offers 8% interest co

Question 1030638: Mitch is tired of renting and decides that within the next 5 years he must save $25,000.00 for the down payment on a home. He finds an investment company that offers 8% interest compounded monthly and begins depositing $275 each month in the account.
A.) Is this monthly amount sufficient to help him meet his 5-year goal?
B.) If not, find the minimum amount he needs to deposit each month that will enable him to meet his goal in 5 years?
Please show all work, in hopes that I can understand afterwards.
I can't use a finance calculator, as that would not help me understand the material.
Answer by Boreal(15235) (Show Source): You can put this solution on YOUR website!
P=k((1+r/n)^nt-1/(r/n), where k is what is deposited each month and P is what you want at the end. r is the rate, and n is the number of compoundings per year. Don't forget the minus 1 in the numerator.
25000=(k(1+.08/12)^60-1/(.08/12)
multiply through by (.08/12)
166.67=k (1.0066670^60)-1. Don't round until end
divide through
$340.25 per month
the amount being deposited is not enough.
P=275(0.48984571)/(.08/12) will give $20,206.14
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