Moisha is saving up money for a down payment on a motorcycle. She currently has $2766, but knows she can get a loan at a lower interest rate if she can put down

Question

Moisha is saving up money for a down payment on a motorcycle. She currently has $2766, but knows she can get a loan at a lower interest rate if she can put down $3318. If she invests the $2766 in an account that earns 4.2% annually, compounded monthly, how long will it take moisha to accumulate the $3318? Round the answer to 2 decimal places. 

Answer 1

Annual rate of 4.2% means a monthly rate of 4.2%/12 = 0.35% (.0035)

 

FV = PV*(1+r)^m

 

 

FV = future value = 3318

PV = present value = 2766

m = # of months -> solve for

r = monthly rate = .0035

 

Using a business calculator this is easy to solve (m = nper; I/Y = 0.35; pmt = 0; FV = 3318; PV = 2766)

 

mathematically, you'd have:

3318 = 2766 * 1.0035^m

solving for m

 

either way you get 52.08 months