# compute the monthly payment

Discuss the forward rate and saving for college. See attached file for full problem description.

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#### Solution Preview

Please see the attached file.

Before we start, I think it helpful that we go over all the formulae that is needed in the computation:

Let FV = future value, PV = present value, N = number of periods (year, quarter, month...)

R = interest rate, PMT = payment per period

Here are the formulae that we need:

1. FV = PV * (1+R) ^ N

where " ^ " means to the power of.

For payments, we have FV = PMT*(1+R) + PMT*(1+R)^2 + ... + PMT*(1+R)^t + ... + PMT*(1+R)^N

where t = the t-th payment.

Then the sum of all the payments is, by using the results from the first question:

FV = PMT [(1+R)^N - 1] / R

Of course, you do ...

#### Solution Summary

Assistance is given to compute the monthly payment.