A property owner has several rental units and wants to build more. How much of each month's rental income should be deposited at the beginning of each month in an account that earns an annual rate of 7.9%, compounded monthly, if the goal is to have $300,000 at the end of 5 years? Round your answer to the nearest cent.
A) $9,018.39
B) $4,066.80
C) $5,052.86
D) $6,537.27
E) $3,365.48

Question

A property owner has several rental units and wants to build more. How much of each month's rental income should be deposited at the beginning of each month in an account that earns an annual rate of 7.9%, compounded monthly, if the goal is to have $300,000 at the end of 5 years? Round your answer to the nearest cent. ​
A) $9,018.39
B) $4,066.80
C) $5,052.86
D) $6,537.27
E) $3,365.48

Quizplus · Accepted Answer

To find the monthly deposit required to reach a future value of $300,000 in 5 years with an annual interest rate of 7.9% compounded monthly, we use the future value of a series formula:$$FV = P \times \left( \frac{(1 + r)^n - 1}{r} \right)$$Where:- $FV$ is the future value, which is $300,000.- $P$ is the monthly deposit.- $r$ is the monthly interest rate (annual rate divided by 12), so $0.079/12$.- $n$ is the total number of deposits (5 years * 12 months/year = 60).Rearranging the formula to solve for $P$:$$P = \frac{FV}{\left( \frac{(1 + r)^n - 1}{r} \right)}$$Plugging in the values:$$P = \frac{300,000}{\left( \frac{(1 + 0.079/12)^{60} - 1}{0.079/12} \right)}$$$$P ≈ $4,066.80$$Therefore, the property owner should deposit approximately $4,066.80 at the beginning of each month.

A Property Owner Has Several Rental Units and Wants to Build