A property owner has several rental units and wants to build more. How much of each month’s rental income should be deposited at the beginning of each month in an account that earns 6.6%, compounded monthly, if the goal is to have $100,000 at the end of 4 years?
The amount that should be deposited at the beginning of each month is $1,845. This amount is calculated by using the formula A = P(1 + r/n)^nt, where A is the amount to be deposited, P is the desired amount at the end of the period (in this case, $100,000), r is the interest rate (6.6%), n is the number of compounding periods per year (12), and t is the number of years (4).
