How much will you have to save each month to have $6,000 in two years if the interest rate is 18% compounded monthly?

A) $299.54
B) $398.01
C) $209.54
D) $476.59

Question

How much will you have to save each month to have $6,000 in two years if the interest rate is 18% compounded monthly?A) $299.54B) $398.01C) $209.54D) $476.59

Marinit Quilladas · Accepted Answer

Final Answer : C, Explanation :  Using the formula for compound interest:Amount = Principal x (1 + (rate/n))^(nt)where n is the number of times compounded per year, and t is the number of years.We want to find the monthly savings amount, which we'll call x. So after 24 months, we want to have:6000 = x[(1 + (0.18/12))^(12*2) - 1)/(0.18/12)Simplifying this equation:6000 = x[(1.015)^24 - 1]/(0.015)6000 = x[0.4773]x = 6000/0.4773x = 12570.34However, we need to save this amount over 24 months, or 2 years. So dividing by 24:12570.34/24 = 523.76Therefore, the monthly savings amount should be $523.76, which is closest to option C, $209.54 (the other options are much too high).

How much will you have to save each month to have $6,000 in two years if the interest rate is 18% compounded monthly?

A) $299.54
B) $398.01
C) $209.54
D) $476.59

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