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clarence has $20, 000 in the bank. He wants to create an investment to pay his $230 monthly car insurance payment for four years, with the first payment dude in one month. How much of his $20, 000 should he invest now at %8.25 per annum, compounded monthly?

  • math - ,

    230/mo * 48mo = 11040 = amt. to be
    saved inc. interest.
    n = 48 = the number of compounding
    periods.
    r = (8.25/12) /100 = 0.006875 = MPR =
    Monthly percentage rate.
    Po = 10^X.
    X = log(Pt)-n*log(r+1)
    X = log(11040) - 48*log(1.006875) =
    X = 4.043 - 0.1428 = 3.900.
    Po = 10^X = 10^3.90 = 7945.89 =
    Initial investment.

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