Ruby is expecting her first child next month and would like to have $80000 saved for university education when the child turns 17.If Ruby can get a 6.6 percent annual return on the education savings for her child,approximately how much does she need to start saving at the end of each month once the baby is born?
A)$2688
B)$392
C)$224
D)$218

Question

Quizplus · Accepted Answer

To find the monthly savings needed, we use the formula for the future value of a series: FV = P * [((1 + r)^n - 1) / r], where FV is the future value ($80,000), P is the monthly payment, r is the monthly interest rate (annual rate / 12), and n is the total number of payments (17 years * 12 months). Rearranging the formula to solve for P gives us P = FV / [((1 + r)^n - 1) / r]. Plugging in the values: r = 6.6% annual interest rate / 12 = 0.55% per month = 0.0055, n = 17 * 12 = 204 months, and FV = $80,000, we find P ≈ $218.

Ruby Is Expecting Her First Child Next Month and Would