Question

How much must be deposited into an account that pays 12.2% annual interest compounded quarterly to receive $13,422 after 5 years.

Answer 1

$7,359.65

Explanation:

The computation of the amount that to be deposited is shown below:

Here we have to calculate the present value

As we know that

Present value = future value ÷(1+ rate of interest)^years

where,

rate of interest = 12.2% ÷ 4 = 3.05%

And, the years is = 5 × 4 = 20

Now the present value is

= $13,422 ÷ (1+ 3.05%)^20

= $7,359.65