Mindy is saving for her wedding in 18 months which is expected to cost $15,000. How much will she need to save monthly at 6% compounded monthly?
A)$485
B)$873
C)$798
D)$1,385

Question

Mindy is saving for her wedding in 18 months which is expected to cost $15,000.  How much will she need to save monthly at 6% compounded monthly?
A)​$485
B)​$873
C)​$798
D)​$1,385

Quizplus · Accepted Answer

To find the monthly savings amount, we use the future value of an annuity formula: $FV = P \times \left( \frac{(1 + r)^n - 1}{r} \right)$, where $FV$ is the future value ($15,000), $r$ is the monthly interest rate (6% annually gives 0.06/12 per month), and $n$ is the total number of payments (18 months). Rearranging to solve for $P$ (the monthly payment), we get $P = FV / \left( \frac{(1 + r)^n - 1}{r} \right)$. Plugging in the values: $P = 15000 / \left( \frac{(1 + 0.06/12)^{18} - 1}{0.06/12} \right)$, which calculates to approximately $798 per month.

Mindy Is Saving for Her Wedding in 18 Months Which