Question

Find the present value that will grow to $23,000 if interest is 5% compounded quarterly for 14 quarters.The present value is $(Round to the nearest cent as needed.)

Answer 1

Remember that

The compound interest formula is equal to

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

where

A is the Final Investment Value

P is the Principal amount of money to be invested (present value)

r is the rate of interest in decimal

t is Number of Time Periods

n is the number of times interest is compounded per year

in this problem we have

A=$23,000

r=5%=0.05

n=4

t=14*3=42 months=42/12=3.5 years

substitute in the formula above

`23,000=P(1+(0.05)/(4))^(4\cdot3.5)`

Solve for P

P=$19,328.47