Youre getting married in two years You want to have enough m

You’re getting married in two years. You want to have enough money for a good down payment on a house. Compute to determine approximately how much money you should deposit each month to achieve this goal that you determine? (8% rate compounded monthly) How much of the money comes from deposits? How much of the money comes from interest?

Solution

Future Value = Periodic payment[{ (1+r)^n -1}/r]

We assum i need $ 1,00,000 down payment in 2 years

F,V. = $ 1,00,000 ; r = 0.08 compounded monthly ; n = 2*12 = 24

1,00,000 = P[(1+0.08)^24 -1)/0.08]

= P[66.76]

Periodic payment = 1,00,000/66.76 = $ 1497.90

Total Money deposited = 1497.90*24 = $35949.67

Money from interest = 1,00,000 - 35949.67 = $ 64050.33