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) About Me  (Show Source):
You can put this solution on YOUR website!
The general formula is
A+=+P%2A%281+%2B+I%2F100%29%5Et
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 30000+=+P%2A%281%2B2%2F100%29%5E32
or P+=+30000%2F%281.02%29%5E32
= 30000%2F1.88454
= 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