Problema Solution
A company will need $65,000 in 6 years for an addition. To meet this goal, the company deposits money in an account today that pays 7% annual interest compound quarterly. Find the amount that should be invested to total $65,000 in 6 years.
Answer provided by our tutors
Let
P = the principal (the amount to invest)
r = 0.07 or 7% annual interest rate
t = 6 years
n = 4*t = 4*6 = 24 compounding periods (the account is compounded quarterly)
A = $65,000 future value
A = P(1 + r/4)^n
P = A/((1 + r/4)^n)
P = 65000/((1 + 0.07/4)^24)
P = $42,863.47
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The amount that should be invested is $42,863.47.