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![First, future value of the given monthly contribution shall be calculated: ((1+r) – 1] FV of Annuity = P т P= Periodic Payme](https://i.imgur.com/2suuUGn.png)
First, future value of the given monthly contribution shall be calculated: ((1+r)" – 1] FV of Annuity = P т P= Periodic Payment r=rate per period n= number of periods Expected balance after 2.5 years $1,100 0.27158% [3.259% / 12 --> Annual interest rate is converted into monthly rate] 30 (2.5 years x 12 --> As there will be 12 deposits in a year] $34,333.08 ($1100 x [((1+0.27158%)^30) - 1] / 0.27158%} Now, considering $34333.08 as the maturity amount in account after 2.5 years, initial deposit today for the remaining shall be calculated: Present value of a future lumpsum receipt = Balance needed in future to reach target / (1 + Monthly interet rate) 111 Montbl.it N umber of months to maturity Amount needed to reach target Monthly interest rate Number of months to maturity Friend need to give as an initial deposit $15,666.92 ($50000 - $34333.08] 0.27158% [3.259% / 12 --> Annual interest rate is converted into monthly rate) 30 (2.5 years x 12 --> As there will be 12 deposits in a year] $14,442.67 ($15666.92 / (1+0.27158%)^30]
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