Answer:
$16,876
Explanation:
first we have to calculate how much money Irene saved until January 1, 2001:
P = PMT × [(1 + r)ⁿ - 1] / r
- PMT = 2,300
- r = 8.4%
- n = 22
P = 2,300 × [(1 + 8.4%)²² - 1] / 8.4% = $134,089
if she stops making any more payments, in 19 years those $134,089 will be worth:
FV = PV x (1 + r)ⁿ
- PV = $134,089
- r = 8.4%
- n = 19
FV = 134,089 x (1 + 8.4%)¹⁹ = $620,797
that means she still needs to get $1,350,000 - $620,797 = $729,203
we can use the first formula to determine the payments she will need to make during the next 19 years:
P = PMT × [(1 + r)ⁿ - 1] / r
- P = 729,203
- r = 8.4%
- n = 19
- PMT = ???
PMT = P / {[(1 + r)ⁿ - 1] / r}
PMT = 729,203 / {[(1 + 8.4%)¹⁹ - 1] / 8.4%} = 729,203 / 43.21 = $16,876
