Question

Mr. and Mrs. Sparky are newlyweds and want to purchase a home, but they need a down payment of 10000. If they want to but their home in 2 years, how much should they save each month in their savings account that returns 3.25%?

Answer 1

I assume you're studying "annuity payment formulas." The newlyweds need to accumulate $10,000 in 2 years, after 24 unknown monthly payments. Their savings account returns 3.25% interest. We'll assume that that's 3.25% per year.

I did a search for "annuity payment formulas" and found the following site that may be helpful:

http://www.investopedia.com/articles/03/101503.asp

Specifically, you might want to look at this excerpt from that site:

Answer 2

Let C be the unknown monthly payment that the couple needs to send in over the next 24 months to have $10,000 at the end of those 2 years.

Let n be the number of payments (which is obviously 24).

Let i be the annual interest rate (which I assume is 3.25% => 0.0325 as a decimal fraction.

Calculate C, the monthly payment, using the given formula.

Answer 3

Note: FV is the "future value," which is $10,000.

Answer 4

I got 296.04 but Im sure thats not correct

Answer 5

I don't think that is correct.

Answer 6

Why are you sure it's not correct? I won't tell you specifically what I got, but our answers aren't far apart. Mind showing me your calculations?

Answer 7

10000= r(1+.0325/12)^(12*2)-1
/ .0325/12

Answer 8

so you're dividing the interest rate by 12? I think you're right on that; but could you explain why you're doing that?

Answer 9

A=R{(1+r/m)^(mt)-1
divided by
r/m

this is the formula

Answer 10

Great that you have access to this formula and know that it applies to the posted homework problem. that 0.0325 is divided by 12 because interest is paid monthly (12 times per year). That exponent, mt, is 12*2 (12 payments over each of two years).

sO, your task is to solve for R. Could you do the math on your calculator and report what figure you arrive at? Is that figure still $294 something?

Answer 11

Im doing something wrong @mathmale

Answer 12

Thanks for you help though. I am out of time this is due in like ten minutes

Answer 13

I get 402.74
I was using a monthly annuity calculator and my own formula,

Answer 14

Here's the formula

Answer 15

Try this:

Solve the annuity formula for C:
\[C = monthly.payment=\frac{ (1+\frac{ 0.0325 }{ 12 } )^{2*12}-1}{ \frac{ 0.0325 }{ 12 } }\]

Answer 16

Here's an annuity calculator that does NOT allow you to solve for the monthly amount.
http://www.coolmath.com/calculators/calculator-annuity-1.html
Anyway, input $402.74 3.25% yearly interest and 2 years - click monthly and the answer for TOTAL is $9,999.88

Answer 17

That's cool, wolf1728, but brimichelle15 won't be able to use an online calculator when her instructor wants her to show all steps of her solution, will she? But the online calculator surely is useful for a check to an answer found through actual calculations by hand.

Answer 18

Sorry that I wasn't responding too often because when I had one answer and brimmichelle had another. I wanted to make REALLY sure I was right. Rechecked my formula, rechecked the calculator, etc. Yes, the teacher would not have accepted the answer alone. :-(

Answer 19

Thank you @wolf1728 and @mathmale for all you help I really appreciate it. If I knew how to give metals I would give one to both of you :)

Answer 20

I think you just have to click the blue "best response" tab next to the name. (Might as well give it to mathmale).

Answer 21

Thanks for the medal brimichelle15
:-)

Answer 22

I'll give mathmale the medal (heck he did a LOT of work).

Answer 23

It's so nice to feel appreciated! Great working with you two! Thanks.