Question

You want to buy a new car, but you don’t want to have a huge car loan payment every month, so you want to pay half of the $24,000 cost. How much money would you need to save each month at 2% annual interest compounded monthly to have $12,000 in the account after 2 years?

Answer 1

The amount I would need to save each month is $500.29.

How much should I save each month?

The formula that can be used to determine the amount I should save each month is : future value / annuity factor

Annuity factor = {[(1+r)^n] - 1} / r

Where:

• r = interest rate = 2% / 12 = 0.17%
• n = number of years = 2 x 12 = 24

Annuity factor =[ (1.0017)^(12 x 2) ] - 1 / 0.0017 = 23.99

Monthly savings = 12,000 / 23.99 = $500.29

To learn more about annuities, please check: brainly.com/question/24108530

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