We are starting to save for a large down-payment, maybe just a car, but possibly for a home.  To hit a target of $50,000 in 3 years, how much will we need to save each month if we expect a 7% annual return on the investment? (Round to ten dollars)


To determine how much you need to save each month to reach a target of $50,000 in 3 years, we can use the formula for the future value of a series of equal payments (an annuity), given a certain interest rate:

\[
FV = P \times \frac{{(1 + r)^n - 1}}{r}
\]

Where:
- $ FV $ is the future value (your target of $50,000),
- $ P $ is the monthly payment,
- $ r $ is the monthly interest rate (7% annual return, so $\frac{7\%}{12}$),
- $ n $ is the number of periods (3 years, so $ 3 \times 12 $).

Let me calculate this for you.To reach a target of $50,000 in 3 years with a 7% annual return, you would need to save approximately **$1,250** per month.

Would you like further details or have any questions?

Here are 5 related questions:
1. How does the target amount change with a different interest rate?
2. What would happen if you saved for a longer or shorter period?
3. How does the total contribution differ from the final amount due to interest?
4. What if you could only save a smaller amount monthly? How would it affect the outcome?
5. What if the return rate fluctuated? How would that affect savings plans?

**Tip:** Compounding interest works best with consistent contributions over time. The earlier you start, the less you'll need to contribute monthly.

We are starting to save for a large down-payment, maybe just a car, but possibly for a home. To hit a target of $50,000 in 3 years, how much will we need to save each month if we expect a 7% annual return on the investment? (Round to ten dollars)

Learn how to calculate the monthly savings needed to reach a $50,000 target in 3 years with a 7% annual return. This problem involves key financial concepts like compound interest and the future value of annuities, suitable for students in Grades 10-12.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation