Question

Solve the problem. Round to the nearest cent.

Mark knows that he will need to buy a new car in 5 years. The car will cost $15,000 by then. How much should he invest now at 8%, compounded quarterly, so that he will have enough to buy a new car?
a. $9452.54
c. $12,328.91
b. $11,025.45
d. $10,094.57

Answer 1

d

Explanation:

x - initial investment

8% - annual rate

x·=15,000,

so x = 10094.54

ANSWER: $10,094.57

Answer 2

He invest $10101.01.

Explanation:

Given : Mark knows that he will need to buy a new car in 5 years. The car will cost $15,000 by then.

To find : How much should he invest now at 8%, compounded quarterly, so that he will have enough to buy a new car?

Solution :

Using compound interest formula,

`A=P(1+r)^t`

Where, A is the amount A=$15000

P is the principle P=?

r is the rate r=8%=0.08

t is the time t= 5 years

Substitute the value,

`A=P(1+r)^t`

`15000=P(1+(0.08)/(4))^(5*4)`

`15000=P(1+0.02)^(20)`

`15000=P(1.02)^(20)`

`15000=P* 1.485`

`P=(15000)/(1.485)`

`P=10101.01`

Therefore, He invest $10101.01.