Aaliyah is saving money and plans on making monthly contributions into an account earning a monthly interest rate of 0.7%. If Aaliyah would like to end up with dollar sign, 34, comma, 000$34,000 after 4 years, how much does she need to contribute to the account every month, to the nearest dollar? Use the following formula to determine your answer.
The formula to calculate the future value of regular monthly contributions is:
FV = Pmt * [(1 + r)^n - 1] / r
Where:
FV = future value (in this case $34,000)
Pmt = monthly contribution
r = monthly interest rate (0.7% or 0.007)
n = number of months (4 years = 48 months)
Now plug in the values into the formula:
$34,000 = Pmt * [(1 + 0.007)^48 - 1] / 0.007
$34,000 = Pmt * [1.3486 - 1] / 0.007
$34,000 = Pmt * 0.3486 / 0.007
$34,000 = Pmt * 49.8
Pmt = $34,000 / 49.8
Pmt ≈ $682.73
Therefore, Aaliyah needs to contribute approximately $682.73 every month to reach her goal of $34,000 in 4 years.