A person is planning to open a savings account with the intent to buy a house in 5 years. They will invest an equal amount each month for 5 years. This account will earn 6% per year (.5% per month) and will have $300,000 at the end of 5 year term. What is the amount of the monthly investment?

A. 4169

B. 4435

C. 4300

D. 5296

The correct answer is C: $4300

Explanation:

Giving the following information:

They will invest an equal amount each month for 5 years.

This account will earn 6% per year (0.5% per month) and will have $300,000 at the end of the 5-year term

We need to use the following formula:

final value = {A[ (1+i) ^n-1]}/r

A = cuota

i = monthly interest

n = 60 months

Isolating A:

A = (FV*i) / [ (1+i) ^n-1]

A = (300000*0.005) / [ (1.005^60) - 1]

A = 1500/0.34885 = 4300