Question

How many dollars must be invested at 16% compounded quarterly to obtain $10,000 in 5 years?

$4190
$4566
$4400
$4760

Answer 1

how many periods does it compound for?

Answer 2

4 I think so 20 total

Answer 3

good, 4 times a year for 5 years is 20 periods entotal

now, 16% is a yearly rate, how much for a quarter?

Answer 4

or rather, what is the period interest rate :)

Answer 5

4% a quarter

Answer 6

good, 4% a period at 20 periods

A(1+.04)^(20) should equal 10000

can you solve for the Amount needed?

Answer 7

I think so, would I just plug in and check for A?

Answer 8

that is one option available to you ..

or just divide the 10000 by (1.04)^(20)

Answer 9

Okay! I got B

Answer 10

4566 is the most reasonable yes :)

http://www.wolframalpha.com/input/?i=10000%281.04%29%5E%28-20%29

Answer 11

Thank you!

Answer 12

youre welcome