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If money is worth 6% compounded quarterly, how much must Stef
deposit at the end of every three months in order to have ₱48,000 in 3 years ?
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It is about a classic Ordinary Annuity saving plan. The general formula is
FV = ,
where FV is the future value of the account; P is the quarterly payment (deposit);
r is the factual quarterly rate presented as a decimal;
n is the number of deposits (= the number of years multiplied by 4, in this case).
From this formula, you get for the quarterly payment
P = . (1)
Under the given conditions, FV = P48,000; r = 0.06/4; n = 3*4. So, according to the formula (1),
you get for the quarterly payment
P = = P3680.64.
Answer. The necessary quarterly deposit value is P3680.64.
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On Ordinary Annuity saving plans, see the lessons
- Ordinary Annuity saving plans and geometric progressions
- Solved problems on Ordinary Annuity saving plans
in this site.
The lessons contain EVERYTHING you need to know about this subject, in clear and compact form.
When you learn from these lessons, you will be able to do similar calculations in semi-automatic mode.