Sarafina is making monthly payments into an annuity She want

Sarafina is making monthly payments into an annuity. She wants to have $300 in the fund to buy a new convection range in six months, and the account pays 4.8% annual interest. What are her monthly payments to the account?

Solution

FVA = P[{(1 + r)ⁿ - 1}/r]

P = (FVA x r)/[(1 + r)ⁿ - 1]

= ($300 x 0.048/12)/[(1 + 0.048/12)⁶ - 1]

= $1.2/(1.024 - 1) = $1.2/0.024 = $49.50