Question

Green thumb landscaping want to build a $124000.00 greenhouse in 2 years. The company sets up a sinking fund with payments made quarterly. Find the payment into this fund if the money earns 12% interest compounded quarterly.

a. $8737.04
b. $13,944.59
c. $12,205.32
d. $6534.80

Answer 1

$150,858.5

Explanation:

The formula for calculating compound interest is expressed as;

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

P is the Principal = $124000.00

r is the rate = 12% = 0.12

t is the total time = 2 years

n is the time of compounding = 1/4 = 0.25(quarterly)

Substitute into the formula;

A= 124000(1+0.12/(0.25))^(0.25)(2)

A = 124000(1+0.48)^0.5

A = 124000(1.48)^0.5

A = 124000(1.2166)

A = 150,858.5

The amount after 2 years if compounded quarterly is 150,858.5