SOLUTION: If money is worth 6% compounded quarterly, how much must Stef save at the end of every three months in order to have ₱48,000 in 3 years?

Algebra ->  Finance -> SOLUTION: If money is worth 6% compounded quarterly, how much must Stef save at the end of every three months in order to have ₱48,000 in 3 years?      Log On


   

Question 1193611: If money is worth 6% compounded quarterly, how much must Stef
save at the end of every three months in order to have ₱48,000 in 3
years?
Answer by ikleyn(52781) About Me  (Show Source):
You can put this solution on YOUR website!
.
If money is worth 6% compounded quarterly, how much must Stef
highlight%28cross%28save%29%29 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 = P%2A%28%28%281%2Br%29%5En-1%29%2Fr%29,    


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 = FV%2A%28r%2F%28%281%2Br%29%5En-1%29%29.     (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 = 48000%2A%28%28%280.06%2F4%29%29%2F%28%281%2B0.06%2F4%29%5E%283%2A4%29-1%29%29%29 = 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.