Nonannual compounding using a calculatorRonnie Rental plans

?(Nonannual compounding using a calculator?)??Ronnie Rental plans to invest ?$350 at the end of each monthmonth for 7 years into an account that pays 10.4 percent compounded monthlymonthly. He will use this money as a down payment on a new home at the end of the 7 years. How large will his down payment be 7 years from? today?

Solution

Answer:

Excel/financial calculator

Compounded monthly interest = 10.4%/12 = rate

Investment made every month = PMT

Number of payments = 7*12 =84 = N

FV = ????

Manual formula = PMT *(((1+r)^n)-1)/r

=$350*(((1+0.00867)^84)-1)/0.00867

=$20,820.10