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1 April, 15:31

You want to have $28,000 saved 3 years from today in order to make a down payment on a house. To fund this, you will make deposits each week from your paycheck into an account that will earn 5.18 percent compounded weekly. How much must you deposit each week

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  1. 1 April, 15:39
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    = $165.991

    Explanation:

    The deposit each week can be determined using the the sinking fund formula.

    A sinking fund is an investment plan where a fixed amount of money is deposited into an interest-yielding account to accumulate a target sum in the future.

    Equal deposit = FV / annuity factor

    Annuity factor = ((1+r) ^ (n) - 1) / r

    FV = future amount, - $28,000

    r - interest rate per period - 5.18%/52 = 0.0996% per week. Remember that there are 52 weeks in a year

    n - number of period = 3 * 52 = 156 weeks

    Annuity factor = ((1 + 0.099%) ^ (156) - 1) / 0.0996%

    = 168.6835499

    Deposit per week

    = 28,000 / 168.683

    = $165.991

    FV = A * ((1+r) ^ (n) - 1) / r
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