Tim Crowe has a trust fund that will be worth $75,000 on his 18^th birthday. Starting then, he will receive equal monthly payments for five years. The trust fund is expected to earn 9% compounded monthly over the five years. How much will Tim receive each month?

Question

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The correct answer is A.The future value of the trust fund on Tim's 18th birthday is $75,000. The trust fund is expected to earn 9% compounded monthly over the five years, so the future value of the trust fund at the end of five years is $75,000 * (1 + 9%/12)^60 = $110,487.20. Tim will receive equal monthly payments for five years, so the amount he will receive each month is $110,487.20 / 60 = $1,545.29.

Tim Crowe Has a Trust Fund That Will Be Worth