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Ashley wants to buy a new computer in 5 years
Ashley wants to buy a new computer in 5 years. She expects the cost of the computer to be $2000. To save up enough money, Ashley will deposit the same amount of money into a savings account at the end of each month. If the annual interest rate is 3.6% and interest is compounded monthly, what is the amount of each of the deposits? Which of the following formulas can be used to solve this problem? SER P=R OA= P(1 + )" A = pe" m ?? A=P(1 + r)
Expert Solution
Answer : Correct Option is S = R {(1+i)^n - 1} / i
where
i is the rate of interest per period ie 3.6% / 12 = 0.3% or 0.003
n is the number of periods i.e 5 * 12 = 60
R is the periodic deposits to be made
S is the purchase price of computer.
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