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9 January, 14:44

Howard is saving for a holiday. He deposits a fixed amount every month in a bank account with an EAR of 14.7%. If this account pays interest every month then how much should he save from each monthly paycheck in order to have $14,000 in the account in four years' time? A) $176

B) $308

C) $220

D) $352

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Answers (1)
  1. 9 January, 14:51
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    C) $220

    Explanation:

    First calculate the APR using an EAR of 14.7% and monthly compounding,

    which comes to 13.7937 %. Then using a periodic rate of 13.7937 / 12, calculate

    the payment over 48 months that gives a future value (FV) of $14,000, which is

    $110.15.
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