You plan to buy the house of your dreams in 5 years. You have estimated that the

Question

You plan to buy the house of your dreams in 5 years. You have estimated that the price of the house will be $119,613 at that time. You are able to make equal deposits every month at the end of the month into a savings account at a rate of 9.99 percent, compounded monthly. How much money should you place in this savings account every month in order to accumulate the required amount to buy the house of your dreamss?

IF you use an answer like this : PMT= rate, nper, pv,fv) I get confused. barney style what u are type in under excel or a calculator

Explanation / Answer

You plan to buy the house of your dreams in 5 years. You have estimated that the price of the house will be $119,613 at that time. You are able to make equal deposits every month at the end of the month into a savings account at a rate of 9.99 percent, compounded monthly. How much money should you place in this savings account every month in order to accumulate the required amount to buy the house of your dreamss?

IF you use an answer like this : PMT= rate, nper, pv,fv) I get confused. barney style what u are type in under excel or a calculator

Money should you place in this savings account every month = pmt(rate,nper,pv,fv)

rate (monthly) = 9.99/12 = 0.8325%

nper = 5*12 =60 month

pv (present value) = 0

FV ( Amount at the end of period) = 119613

Money should you place in this savings account every month = pmt(0.8325%,60,0,119613)

Money should you place in this savings account every month = $ 1545.06

Alternatively using Equation

FV = ( A * [(1+i)n - 1 ] ) / i

Where,

FV = Maturity value = 119,613

A = Annuity or Monthly Installment = A

i = Rate of Interest = 9.99/12 = 0.8325%

n = Number of Months = 5*12 = 60

119,613 = ( A * [(1+0.8325%)60 - 1 ] ) / 0.8325%

119613 = A* (1.644493-1)/ 0.8325%

119613 = A* 77.41658

A = 119613/77.41658

A = $ 1545.06

Answer

Money should you place in this savings account every month = $ 1545.06

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