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Find how much money needs to be deposited now into an account to obtain $ 8,700 (Future Value) in 9 years if the interest rate is 2% per year compounded quarterly ( 4 times per year).

User Olahell
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Final answer:

To obtain $8,700 in 9 years at an interest rate of 2% per year compounded quarterly, approximately $6,772.09 needs to be deposited now into the account.

Step-by-step explanation:

To find out how much money needs to be deposited now into an account to obtain $8,700 in 9 years with an interest rate of 2% per year compounded quarterly, you can use the formula for compound interest:

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

Where:

  • A is the future value ($8,700 in this case)
  • P is the principal amount (the amount to be deposited now, which we need to find)
  • r is the annual interest rate (2% per year in this case)
  • n is the number of times the interest is compounded per year (4 times per year in this case)
  • t is the number of years (9 years in this case)

Plugging in the given values into the formula, we get:

8,700 = P(1 + 0.02/4)^(4*9)

Simplifying the equation, we can then solve for P:

P = 8,700 / (1 + 0.02/4)^(4*9)

P = 8,700 / (1 + 0.005)^(36)

Calculating this on a calculator, the principal amount (P) comes out to be approximately $6,772.09. Therefore, approximately $6,772.09 needs to be deposited now into the account to obtain $8,700 in 9 years.

User Nouman
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