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Travis international has a debt payment of $2.2 million that it must make 4 years from today. the company does not want to come up with the entire amount at that time, so it plans to make equal monthly deposits into an account starting 1 month from now to fund this liability. if the company can earn a return of 4.63 percent compounded monthly, how much must it deposit each month?

Respuesta :

The amount of money that should be deposited each month is $41,806.52

How much should be deposited monthly?

An annuity is when money is paid or received over a period of time. An ordinary annuity is when the payments occur at the end of the period.

The formula that can be used to determine the amount to be deposited each month is:

Present value = future value / annuity factor

Annuity factor = {[(1+r)^n] - 1} / r

Where:

  • r - monthly interest rate = 4.63 / 12 = 0.38583%
  • n = number of periods = number of years x number of compounding period in a year = 4 x 12 = 48

Present value = 2.2 million / [{(1.00386^48)-1} / 0.00386] = $41,806.52

To learn more about annuities, please check: https://brainly.com/question/24108530

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