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    compute the monthly payment

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

    © BrainMass Inc. brainmass.com October 9, 2019, 7:47 pm ad1c9bdddf


    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.