Answer:
You must invest each month, starting next month, for 3 months at a rate of 5% compounded monthly $975.36, in order to just covert the cost of the camp of your child.
Explanation:
Hi, we need to equal the future value of an annuity to the value of $1,000 per month, for 3 months in month 6, in order to pay from month 7 through 9 for the camp, using a discount rate of 5% APR, (which is 0.05/12=0.004167 or 0.4167% effective monthly). The equation we need to solve for "A" is as follows.
[tex]\frac{A((1+0.004167)^{3}-1) }{0.004167} (1+0.004167)^{3} =\frac{1,000((1+0.004167)^{3} -1)}{0.004167(1+0.004167)^{3} }[/tex]
[tex]A(3.050335001)=2,975.17[/tex]
[tex]A=\frac{2,975.17}{3.050335001} =975.36[/tex]
So, you need to invest $975.36, for 3 months, starting next month, in order to pay all three months of camping, starting in month 7 (included) through month 9, at 5% APR (compounded monthly).
Best of luck.
