You want to purchase a new car in 88 years and expect the car to cost $58 comma 00058,000. Your bank offers a plan with a guaranteed APR of 5.5 %5.5% if you make regular monthly deposits. How much should you deposit each month to end up with $58 comma 00058,000 in 88 years?

The monthly deposit required is $2,411.

Explanation:

We can use a financial calculator to solve the following.

The period is for 88 years thus we will make N = 88.

The interest rate is 5,5% thus we will make I/Y = 5,5$

The future value needs to be $58000. Thus FV = 58000

The present value is currently 0.

We need to calculate the monthly payments. Thus we will solve for payments (PMT).

The annual investment will be 28,939 / 12 = $2,411 per month over 88 years.

Alternatively we can use the annuity formula which is PMT = FV x i / - 1

Using this formula we also end up with an answer of 28,939. We then divide this by 12 to get the monthly amount of  $2,411.

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