Question

You want to purchase a new car in 5 years and you anticipate the cost of the car to be $55,000. You are given an investment plan with a fixed APR of 6.2%, assuming that you make regular monthly deposits.  How much should you deposit at the beginning of each month to reach your goal of $55,000 in 5 years? Round to the nearest cent.

Answer 1

Wow - that is an unusual calculation.  You'll need a formula for the monthly payment of a monthly annuity, and it is located here:
http://www.1728.org/annuity3.htm  (see formula 2)
You'll find THAT page and THIS page very helpful:
http://www.1728.org/annuitym.htm


rate = rate / 1,200
rate = 0.005166666667
n= number of months = 5 * 12 = 60

monthly amount = [Total] / ([(1 + rate)^(n+1) -1] / [rate]) -1

monthly amount =
55,000 / [[( 1.005166666667)^(61)-1] /  1.005166666667] -1

monthly amount = 55,000 / [[1.3693761617 -1] / .005166666667]-1
monthly amount = 55,000 / [[.3693761617] / .005166666667]-1
monthly amount = 55,000 / (( 71.4921603244)-1)
monthly amount = 55,000 / ( 70.4921603244)
monthly amount = 780.2286062293
OR 780.23 (rounded)

Yes, it's just that "simple". LOL

Answer 2

I think the answer is 780.23 but im not sure if i made a calculation mistake.