Question

Travis International has a one-time expense of $2.86 million that must be paid three years from now. Since the firm cannot raise that amount in one day, it wants to save an equal amount each month over the next three years to fund this expense. If the firm can earn 2.1 percent on its savings, how much must it save each month?
A) $91 ,300.05

B) $73,901.15

C) $77,037.69

D) $87,411.08

E) $78.416.20

Answer 1

Answer:

monthly saving  = $77037.69

Explanation:

given data

expense = $2.86 million

earn on saving = 2.1 percent

to find out

how much must it save each month

solution

we find here monthly saving  by formula that is

monthly saving  = future value ÷ $\frac{(1+r)^{nt}-1}{r}$      .................1

here r is monthly rate that is $\frac{2.1}{12}$ = 0.175% and n is 12 and time is 3 year

so put here value we get

monthly saving  = 2860000 ÷ $\frac{(1+0.00175)^{36}-1}{0.00175}$    

monthly saving  = $77037.69