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Calculate amount that you will need to deposit

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At the end of the last week in January 2011 you opened a holiday savings account with your bank and made your first deposit into it to save for your overseas holiday that you will be take from the first week of October to the end of the last week of December 2011. You have budgeted that you will need to be able to withdraw $2,000 per month from your account at the start of each month of your holiday. The nominal interest rate on your savings account is 4.5 percent per annum compounded monthly. Use financial maths to calculate the equal amount that you will need to deposit into your account at the end of each month if you intend to make your last deposit at the end of August 2011. Draw appropriate timeline(s) to demonstrate your calculations.

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Solution Summary

This solution illustrates how to use the Excel PV and PMT functions to determine how much a person would need to deposit at the end of each month to withdraw a certain amount each month thereafter.

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