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travis international has a debt payment of $2.22 million that it must make 6 years from today. the company does not want to come up with the entire amount at that time, so it plans to make equal monthly deposits into an account starting 1 month from now to fund this liability. if the company can earn a return of 4.73 percent compounded monthly, how much must it deposit each month?

Respuesta :

Travis international need to deposit $26772.79 per month to clear the debt

Principle amount = $2.22 million = $2,220,000

Time, n = 6 years = 72 months

Rate of interest = 4.73%

Monthly rate of interest, r = 4.73% ÷ 12 = 0.39% = 0.0039

Compounded monthly

FV of Annuity = ( Monthly deposits ) × { [ ( 1 + r )ⁿ - 1 ] ÷ r }

$ 2,220,000 = ( Monthly deposits ) × { [ ( 1 + 0.0039 )⁷² - 1 ] ÷ 0.0039 }

$2,220,000 = ( Monthly deposits ) × { [  1.3234 - 1  ] ÷ 0.0039 }

$2,220,000 = ( Monthly deposits ) × [ 0.3234 ÷ 0.0039 ]

$2,220,000 = ( Monthly deposits ) × 82.92

Monthly deposits = $26,772.79

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