Howard is saving for a holiday. He deposits a fixed amount every month in a bank account with an EAR of 14.7%. If this account pays interest every month then how much should he save from each monthly paycheck in order to have $14,000 in the account in four years' time? A) $176

B) $308

C) $220

D) $352

Question

Business

Pedro Morales

21 October, 15:11

Howard is saving for a holiday. He deposits a fixed amount every month in a bank account with an EAR of 14.7%. If this account pays interest every month then how much should he save from each monthly paycheck in order to have $14,000 in the account in four years' time? A) $176

B) $308

C) $220

D) $352

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Answers (1)

Know the Answer?

Sammy Berg · Answer 1

C) $220

Explanation:

First calculate the APR using an EAR of 14.7% and monthly compounding,

which comes to 13.7937 %. Then using a periodic rate of 13.7937 / 12, calculate

the payment over 48 months that gives a future value (FV) of $14,000, which is

$110.15.

Howard is saving for a holiday. He deposits a fixed amount every month in a bank account with an EAR of 14.7%. If this account pays interest every month then how much should he save from each monthly paycheck in order to have $14,000 in the account in four years' time? A) $176B) $308C) $220D) $352