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Travis International has a one-time expense of $1.13 million that must be pald two years from today. The firm can earn 4.3 percent, compounded monthly, on its savings. How much must the firm save each month to fund this expense If the firm starts Investing equal amounts each month starting at the end of this month? Multiple Cholce

A. $38.416.20
B. $45,17202
C. $51,300.05
D. $47.411.08
E. $53.901.15

Respuesta :

ahmedgodtrust

              FV = A((1 + r/m)nm  -1)      

                             r/m

$1,130,000  =    A(1 + 0.043/12)2x12  - 1)

                                 0.043/12

$1,130,000 =     A(1 + 0.003583)24  - 1)

                                0.0035833

$1,130,000 =     A(1.003583)24 – 1)

                               0.0035833

$1,130,000 = A(25.01329)

A = $1,130,000/25.01329342

A = $45,175.98

The correct answer is B

Explanation:

In this case, there is need to apply future value of annuity formula where the future value is $1,130000, interest rate is 4.3%, number of compounding periods in a year is 12 and number of years is 2. We will make A (monthly saving) the subject of the formula.

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