Question

the super ball lottery was won by joan; her winnings were $500,000.00 to be paid in quarterly payments of $12,500.00 each over 10 years. How much must Super Ball deposit in an account paying 8 percent interest compounded quarterly for 10 years in order to meet their commitment to joan?

Answer 1

The formula to calculate compound interest related problems is:

`A=P((1+ (r)/(n))^(nt))`
A is the total money earned (money from the lottery plus money from the interest); P is the money received from the lottery ($500,000.00); r is the percentage of interest (8% or 0.08); n is how many times the money is compounded in a year (in this case is quarterly, so, 4 times); and t is the number of years that the payment is being done for (10 years).

This would be the aftermath:

`A=500,000.00((1+ (0.08)/(4))^(4*10))` ⇔
`A=1,104,019.83`

The total money that Super Ball should deposit in Joan's account is $1,104,019.83.