Liz and Bob just had a baby named Isabelle, and they want to save enough money for Isabelle to go to college. Assume that they start making monthly payments when Isabelle is 5 into an ordinary annuity earning 3.79%, and they calculate that they will need $21,200.00 by the time Isabelle turns 18. How much should they deposit every month so that they reach their goal

They should deposit $105 every month so that they reach their goal.

Explanation:

Given - Liz and Bob just had a baby named Isabelle, and they want to

            save enough money for Isabelle to go to college. Assume that

             they start making monthly payments when Isabelle is 5 into an

             ordinary annuity earning 3.79%, and they calculate that they will

             need $21,200.00 by the time Isabelle turns 18.

To find - How much should they deposit every month so that they reach

              their goal.

Proof -

We know the formula -

Future value =

Here , we have

i =

n = 12×(18 - 5) = 156

Future value = 21,200.00

∴ we get

21,200.00 =

⇒21,200 =

⇒21,200 =

⇒21,200 =

⇒21,200 =

⇒21,200 = PMT(201.2008924)

⇒PMT =

⇒PMT = 105.3673259 ≈ $105

∴ we get

They should deposit $105 every month so that they reach their goal.