Question

A company will need $25,000 in 6 years for a new addition. To meet this goal, the company deposits money in an account today that pays 10% annual interest compounded quarterly. Find the amount that should be invested to total $25,000 in 6 years.

Answer 1

To find the amount that should be invested to total $25,000 in 6 years with 10% annual interest compounded quarterly, we can use the formula for compound interest. Plugging in the values and solving the equation will give us the principal amount to be invested.

Step-by-step explanation:

To find the amount that should be invested to total $25,000 in 6 years, we can use the formula for compound interest: A = P(1 + r/n)^(nt), where A is the future value, P is the principal (the amount to be invested), r is the annual interest rate, n is the number of times the interest is compounded per year, and t is the number of years. In this case, the principal P is what we want to find.

Plugging in the given values, we have: $25,000 = P(1 + 0.10/4)^(4 * 6). Simplifying this equation will give us the value of P, which is the amount that should be invested.

Note: Remember to convert the percentage to decimal form by dividing by 100 before plugging it into the formula.