A company plans to replace its fleet of company ears in the

A company plans to replace its fleet of company ears in the near future. The company estimates that it will need $540,000 in 5 years. If the company can cam 5% interest compounded quarterly, how much should the company invest now in order to cover the cost of the cars in 5 years.

Solution

A=540000

r=5% =0.05

n=4(compounded 4 times in year)

t =5 years

P=amount needed to be invested

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

540000=P(1+(0.05/4))^4*5

540000=P(1.0125)²⁰

P=421204.6

amount needed to be invested =421204.6$