Youre prepared to make monthly payments of 225 beginning at

You’re prepared to make monthly payments of $ 225, beginning at the end of this month, into an account that pays 6 percent interest compounded monthly. How many payments will you have made when your account balance reaches $40,000 ?

Solution

Ans)

Monthly payments begining at the end of the month =$225

Interest compounded monthly = 6%( assume it is per month interest rate)

  The formula for annual compound interest is A = P (1 + r/n) ^ nt:

A = the future value of the investment/loan, including interest

P = the principal investment amount (the initial deposit or loan amount)
r = the annual interest rate (decimal)
n = the number of times that interest is compounded per year
t = the number of years the money is invested or borrowed for

225 *(1+r/n)^{nt = 40,000}

^{(1+r/n)nt =40000/225}

(1+6/100)^{nt = 178}

^{Using trail and error method nt = 10}

   ^{assume that period is 1yr then 10 payments will have made when account balance reaches $ 40,000.}