Problema Solution
Mrs. Stevens wants to have $18,000 in the bank in 3 years. If she deposits $9500 today at 4% compounded quarterly for 3 years, how much additional money will she need to reach the desired $18,000?
Answer provided by our tutors
Let
P = $9.500.00 the principal
r = 0.04 or 4% annual rate
i = r/4 = 0.04/4 = 0.01 interest rate per period
m = 4 compounding period per year (compounded quarterly)
t = 3 years the time
n = t*m = 3*4 = 12 total number of compounding periods
A = the future value
A = P(1 + i)^n
A = 9,500(1 + 0.01)^12
........
........
A = $10,704.84
18,000 - 10,704.85 = $7,295.15
She will need $7,295.15 additional money to reach the desired $18,000.