Math question

Question

Suppose you are going to need $40,000 for your child to attend college 18 years from now. How much would you have to deposit monthly into an annuity bearing 5.75% interest compounded monthly in order to meet your goal?
 


1)Monthly payment: ???

Answer 1

A = money accumulated

P = deposit

r = interest rate

t = time in years

n = number of time compounded per year

 

Use the formula:

 

A=P(1+(r/n))^nt

 

We know that

 

A = 40000

r = 0.0575

t = 18

n = 12, since it is a monthly compound

 

You need to find P