Question

A compamy will need $25,000 in7 years for a new addition. To met the goal, the company deposits money in an account today that pay 3% annula interest compund quarterly. Find the amount that should be invested to total %25,000 in 7 years?

Answer 1

25,000 = A( 1 + r/n)^(4n)

where A is the amount invested, r = annual rate = 0.03, and n = number of payments per year (=4)

solve for A

Answer 2

??

Answer 3

this is the formula for amount obtained by compound interest

Answer 4

plug in values of r, n and solve for A
can u do this?

Answer 5

So what is the set up for the equation?

Answer 6

25,000 = A(1 + (0.03)/4)^28

Answer 7

A = 25,000 / (1 + (0.03)/4)^28

Answer 8

Sorry, I am not getting this

Answer 9

have you seen this formula before?

Answer 10

not really, I am not good with formulas

Answer 11

compound interest accumulates every so often - in this case its every 3 months (quarterly)
compound means that after each period the interest on the accumulated total is added.

for example 1000 invested at 5% annually
after 1 year the anount becomes 1000 + 5% 0f 1000 = 1050
after 2 years ............................ 1050 * 5% of 1050

this leads to the formula i posted

in that case A = amount to be invested (which we need to find ) .

we need to find this using algebra

Answer 12

a simple example is
1000 = 10 A
so A = 1000/10

-but in our case its not 10 its (1 + (0.03)/4)^28

Answer 13

Is the answer 250?

Answer 14

Ok, so the had to put 750 deposit, so after that they would have to put down 250 every year for 7 years to get 25,000????

Answer 15

no the answer is
A = 25,000 / (1 + (0.03)/4)^28
which you can do on a calculator
it comes
$20,280.48

Answer 16

So the company has to invest 20,280.48 dollars?

Answer 17

theres just one investment and this accumulates over 7 years to 25,000

Answer 18

yea - oh its 20,280.49 - my typo

Answer 19

20,280.49 to the nearest dollar

Answer 20

right

Answer 21

nearest cent

Answer 22

nearest dollar

Answer 23

well as neeed

Answer 24

no sir - its 20,280 dollars and 49 cents

Answer 25

to nearest dollar its 20,280

Answer 26

- i don't think the companies too worried about cents...

Answer 27

hope this has helped

Answer 28

20,280.00 correct?

Answer 29

yes

Answer 30

You have really helped me out alot, thank you for all your help

Answer 31

yw

Answer 32

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