A company will need 65000 in 6 years for a new addition To m

A company will need $65000 in 6 years for a new addition. To meet this goal, the company deposits money in an account today that pays 12% annual interest compounded quaterly. Find the amount that should be invested to total $65000 in 6 years.

Solution

A company will need $65000 in 6 years for a new addition. To meet this goal, the company deposits money in an account today that pays 12% annual interest compounded quaterly. Find the amount that should be invested to total $65000 in 6 years.

Solution :

A = P(1 + r/n)^(nt)

Quarterly ---> so, n = 4
t = time = 6 years
A = future value = 65000
P = to be found
r = 12% = 0.12

Plug these in :

65000 = P(1 + 0.12/4)^(4*6)

65000 = P(1 + 0.03)^(24)

65000 = P(1.03)^24

P = 65000 / (1.03)^24

P = 31975.69 ---> ANSWER