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18 October, 15:35

Your brother would like to have $27,000 in 3 years for the purchase of a new car. What monthly payment should he make into an account paying 7% per year compounded monthly to attain his goal?

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  1. 18 October, 18:53
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    The monthly payment which is required to achieve the goal is $676.18

    Explanation:

    The monthly payment which is required to achieve the goal is computed as:

    Using the excel formula of PMT:

    =PMT (rate, nper, pv, fv, type)

    where

    PMT is payment monthly

    rate is 7%

    but rate is compounded monthly, so

    r = 7% / 12

    nper is number of years which is 3 years

    but the number of years also compounded monthly, so

    nper = 3 * 12

    fv is future value, which is $27,000

    Putting the values above:

    =PMT (7%/12,3 * 12,0,-27000,0)

    = $676.18
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