00:01
Hello students, in this question we are given the final amount after 30 years equal to $700 ,000 and rate of interest is equal to 5%.
00:30
So, we are asked to find out the monthly payment that we need to pay so that we get $700 ,000 after 30 years.
00:46
So, for that we will be using the equation called future value of an annuity.
00:58
So, fv is given as fv is equal to pmt into 1 plus r whole raised to n minus 1 divided by r.
01:22
So, where pmt is the monthly payment, n is the number of months and r is the rate of interest per month.
01:51
So, now coming back to the question, we are given that the future value is equal to $700 ,000 and rate is equal to 5 % per year.
02:07
So, r is equal to 5 by 12 into 100 which is equal to 0 .00417 per month and n is equal to number of months.
02:26
So, 12 into 30 because 30 years we need to pay which is equal to 360 months.
02:37
So, now plugging in these values in the equation we get 700 ,000 equal to pmt into 1 plus 0 .00417 whole raised to 360 divided by 0 .00417 whole divided by minus 1.
03:11
So, we get on solving pmt is equal to $841 .08...