MA 162 HW 20: Problem 6

Question

Sally has a sum of $21000 that she invests at 7% compounded monthly. What equal monthly payments can she receive over a period of 10 years and or18?

Answer 1

Hi Sam, in this question, you have:

1. The present value of an annuity, let's say an ordinary annuity: $21,000
2. The interest rate: 7%
3. The compounding frequency: 12
4. The number of years being either 10 years or 18 years means you have 2 separate equations to solve, one for each number of years.
5. Number of years x compounding frequency = number of periods, i.e. 10 x 12 = 120 or 18 x 12 = 216