Would like to start a college fund. It was estimated that the cost for college to be 60,000 per year. How much should be deposit into the account each month for 18 years to accumulate a total of 240,000 @ 12% interest earned.
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do u want to find out the pv of 108000 i think? isnt it?
To calculate how much money you need to deposit each month for 18 years to accumulate a total of $240,000 at a 12% interest rate, you can use the future value of an ordinary annuity formula.
The future value of an ordinary annuity formula is:
FV = P * ((1 + r)^n - 1) / r
Where:
FV = Future Value
P = Monthly deposit
r = Interest rate per period (monthly interest rate in this case)
n = Number of periods (number of months in this case)
First, let's calculate the monthly interest rate:
Monthly interest rate = Annual interest rate / Number of periods per year
In this case, the annual interest rate is 12%, and since we are depositing money each month, the number of periods per year is 12.
Monthly interest rate = 12% / 12 = 1%
The number of periods (months) is 18 years * 12 months = 216 months.
Now, let's plug in the values into the formula and solve for P:
$240,000 = P * ((1 + 1%)^216 - 1) / 1%
To solve this equation, we can use algebra or a financial calculator.
Using an online future value of an ordinary annuity calculator, we find that the monthly deposit needed is approximately $244.70.
So, in order to accumulate a total of $240,000 after 18 years at a 12% interest rate, you would need to deposit approximately $244.70 into the account each month.