A recent college graduate's gift from her grandparents is $29,000.

Question

How much will this provide at the end of each month (in $) for the next 12 months while the graduate travels? Assume that money is worth 7.8% compounded monthly. (Round your answer to the nearest cent.)

Answer 1

Mark M. is correct that only simple interest is involved.

However, I would interpret 7.8% to be the annual interest rate.

The monthly (nominal) interest rate is 7.8/12 (=.0065) and the true monthly interest rate is

1.078^1/12-1. Please note that I am aware that almost everybody teaches nominal interest rate.

Further note:

(1.0065)¹²=1.08085, not 1.078.

Answer 2

If the graduate withdraws the interest at the end of each month then the account is no different than simple interest.

(29000)(0.078) = ?