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Suppose that a family wants to start a college fund for their child. If they can get a rate of 7. 5%, compounded monthly, and want the fund to have a value of $75,000 after 18 years, how much should they deposit monthly? Assume an ordinary annuity and round to the nearest cent. A. $164. 98 b. $165. 30 c. $166. 21 d. $167. 52.

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abidemiokin

The amount that should deposit monthly is $164.98

The formula for calculating the compound amount is expressed as:

[tex]A=P(1+\frac{r}{n} )^{nt}[/tex]

  • P is the amount invested
  • A is the amount after 18 years = $75000
  • r is the rate = 7.5% = 0.075
  • t is the time in years = 18 years
  • n is the compounding time = 12 (monthly)

Substitute the given values into the formula to have:

[tex]75000=P(1+\frac{0.075}{12} )^{12(18)}\\75000 = P(1.00625)^{216}\\75000 =P(3.84125)\\P = \frac{75000}{3.84125}\\P= \$19,524.89[/tex]

Hence the amount of money they started with is $19,524.89.

Amount to deposit monthly = 19,524.89/120

Amount to deposit monthly = $164.98

Hence the amount that should deposit monthly is $164.98

Learn more on compound interest here: https://brainly.com/question/24274034

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