A property owner has several rental units and wants to build more. How much of each month's rental income should be deposited at the beginning of each month in an account that earns an annual rate of 6.8%, compounded monthly, if the goal is to have $150,000 at the end of 7 years? Round your answer to the nearest cent.
A)$3,155.45
B)$1,391.38
C)$1,742.00
D)$2,270.66
E)$1,142.50

Question

Quizplus · Accepted Answer

The amount of money needed to reach the goal of $150,000 in 7 years can be calculated using the formula for compound interest:

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

where A is the amount of money at the end of the 7 years, P is the amount deposited each month, r is the annual interest rate (6.8%), n is the number of times the interest is compounded per year (12), and t is the number of years (7).

We can solve for P by plugging in the given values and solving for P:

$150,000 = P(1 + 0.068/12)^(12*7)
$150,000 = P(1.00567)^84
P = $1,391.38

Therefore, the property owner should deposit $1,391.38 at the beginning of each month to reach their goal of $150,000 in 7 years.

A Property Owner Has Several Rental Units and Wants to Build