Question

You wish to have $3000 in 2 years to buy a fancy new stereo system. How much should you deposit each quarter into an account paying 8% compounded quarterly?

Answer 1

Deposit each quarter = $342.68

Step-by-step explanation:

Formula use in this problem:

`FV=C* \left [ ((1+i)^n-1)/(i) \right ]* (1+i)`

Where,

FV is future value, FV=$3000

C is cash flow quarterly( need to find),C=?

I is rate of interest ( divide by 4), i=
`(0.08)/(4)=0.02`

N number of cash flow, n=8

Substitute all these values into formula to solve for C

`3000=C* \left [ ((1+0.02)^8-1)/(0.02) \right ]* (1+0.02)`

`C=(3000* 0.02)/([(1+0.02)^8-1]* (1+0.02))`

So, C=$342.68