Question

You would like to have $170,000 in 12 years by making regular deposits at the end of each month in an annuity that pays 8.25% compounded monthly. How much of the $170,000 comes from interest? Round your answer to the nearest dollar.

Answer 1

What's your plan? I would build it from basic principles.

i = 0.0825 -- Annual Interest Rate
j = I/12 = 0.006875 -- Monthly Interest Rate
r = 1+j = 1.006875 -- Monthly Accumulation Factor

Last Payment: Pmt*1
2nd to last payment: Pmt*r
3rd to last payment: Pmt*r^2
etc

All told: \(Pmt\cdot(1 + r + r^{2} + ... + r^{143}) = 170000\)

Can you add those up inside the parentheses?