Your goal is to accumulate in 4 years $5,000.If you can earn a rate of 4%, compounded monthly, what will be your end of month monthly payment need to be to reach this goal?
A)$96
B)$104
C)$124
D)$262
E)$300

Question

Quizplus · Accepted Answer

The correct answer is A.The formula for the future value of an annuity is:FV = PMT * (((1 + r/n)^(n*t)) - 1) / (r/n))where:FV is the future valuePMT is the monthly paymentr is the annual interest raten is the number of times per year that the interest is compoundedt is the number of yearsIn this case, we have:FV = $5,000r = 4% = 0.04n = 12 (monthly compounding)t = 4Substituting these values into the formula, we get:$5,000 = PMT * (((1 + 0.04/12)^(12*4)) - 1) / (0.04/12))Solving for PMT, we get:PMT = $96.04Therefore, the end of month monthly payment needed to reach the goal of $5,000 in 4 years is $96.

Your Goal Is to Accumulate in 4 Years $5,000