Suppose that a family wants to start a college fund for their child. if they can get a rate of 5.5% , compounded monthly, and want the fund to have a value of $35,450 after 20 years, how much should they deposit monthly? assume an ordinary annuity and round to the nearest cent.
answers:
a.
$81.38
b.
$80.01
c.
$11,829.97
d.
$11,776.00

They should deposit $81.38 monthly.

Step-by-step explanation:

The formula of Future Value of an Annuity is as follows :

FV of annuity =

Where FV of annuity = $35,450

P = Monthly Payment

r = rate of interest 5.5% annually = %

n = number of period = 20 years = 240 months

Now put all the values

⇒35450 =

⇒ P       35450    

⇒ 81.37688 rounded to 81.38