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28 August, 17:32

A company plans to replace one of its machines 5 years from now. If they deposit $6,827 a month in an account that gives them 0.65% interest per month. How much money will they still need to pay for the machine if the cost is $1,123,553 at that time in the future?

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  1. 28 August, 19:21
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    They would require $624,532.94 more

    Explanation:

    The first task is to compute the future value of the monthly deposit of $6,827 with an interest of 0.65% per month for five years.

    =fv (rate, nper,-pmt, pv)

    rate id 0.65% per month

    nper is the number of deposits = 5 years*12=60

    pmt is the monthly deposit of $6,827

    pv is the present value of deposits, it is unknown and taken as zero

    =fv (0.65%,60,-6827,0) = $499,020.06

    balance of the required funds=required funds-future value of the deposits

    balance of required funds = $1,123,553-$499,020.06=$624,532.94
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