Question
Joe needs
in 4 years. What amount can he deposit at the end of each month at
annual rate of interest compounded monthly, so he will have his
? Round to the nearest cent.
A.
B.
C.
D.
A.
B.
C.
D.
Ask by Beck King. in the United States
Jan 11,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
Joe needs to deposit approximately $226.35 at the end of each month to reach $12,000 in 4 years with a 5% annual interest rate compounded monthly.
Solution

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Beyond the Answer
To find the monthly deposit Joe needs to make, we can use the future value of a series formula, which is:
Where:
-
is the future value ($12,000) -
is the monthly deposit -
is the monthly interest rate (annual rate / 12) -
is the total number of deposits (months)
Given:
-
- Annual interest rate =
or - Monthly interest rate
- Total months
We need to solve for
:
Rearranging the formula gives:
Substituting the values we have:
Calculating:
- Calculate
:
- Subtract 1:
- Calculate the numerator:
- Calculate
:
Thus, the amount Joe needs to deposit at the end of each month is
.
Joe will indeed have exactly $12,000 in 4 years if he follows this plan!