SOLUTION: A company will need $30,000.00 in 8 years for a new addition. To meet this goal,the company deposits money in an account today that pays 8% annual interest compounded quarterly. Fi
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Question 42323: A company will need $30,000.00 in 8 years for a new addition. To meet this goal,the company deposits money in an account today that pays 8% annual interest compounded quarterly. Find the amount that should be invested to total $30,000.00 in 8 years.
Answer by psbhowmick(878) (Show Source): You can put this solution on YOUR website!
The general formula is
where P = principal that becomes amount = A in 't' years at the rate I% compound interest per annum.
Here I is 8% per annum (12 months).
So I is 2% per quarter (3 months).
So time 't' will also be in quarters.
Put A = 30,000, I = 2 and t = 32 (since 32 quarters in 8 years) in the formula.
You get
or
=
= 15919 (approx)
Thus the $15919 will amount to $30,000 in 8 years at 8% rate compounded quarterly.
For checking the correctness answer you may visit this site
http://id.mind.net/~zona/mmts/functionInstitute/exponentialFunctions/compoundInterest.html
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