SOLUTION: Mr. Nakamura wants to make monthly deposits into an annuity for his grandchild so that $10,000 will be available in 7 years. If the interest rate is 7% compounded monthly, find the

Algebra ->  Finite-and-infinite-sets -> SOLUTION: Mr. Nakamura wants to make monthly deposits into an annuity for his grandchild so that $10,000 will be available in 7 years. If the interest rate is 7% compounded monthly, find the      Log On


   

Question 1131685: Mr. Nakamura wants to make monthly deposits into an annuity for his grandchild so that $10,000 will be available in 7 years. If the interest rate is 7% compounded monthly, find the monthly deposit. (Round your final answer to two decimal places.)
Found 2 solutions by Boreal, greenestamps:
Answer by Boreal(15235) About Me  (Show Source):
You can put this solution on YOUR website!
FV(r/n)=payment*(1+(r/n)^84-1, the 84 number of compoundings
round at end
10000(.07/12)=p*(1+(.07/12))^84-1
p=$92.59

Answer by greenestamps(13203) About Me  (Show Source):
You can put this solution on YOUR website!


Use the standard formula for an annuity, with contributions of x monthly for 7 years (84 total contributions), with an annual interest rate of 7% compounded monthly, with a future value of $10,000...

10000+=+x%28%28%281%2B.07%2F12%29%5E84-1%29%2F%28.07%2F12%29%29

Evaluate the expression in parentheses, then divided 10000 by the result to find the monthly contribution x.

I recommend evaluating the expression one small step at a time; if you try to enter it in your calculator all at once, it is far too easy to get parentheses in the wrong places, giving ridiculous answers.

(answer: $92.59)