Question

If Dain wants $50,000 after 3 years to make a down payment on a house, how much does he need to invest every quarter, into an account that pays 6% compounded quarterly?

Dain needs to invest $_____ every quarter.

Answer 1

$41,820.01

Explanation:

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

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

Where,

P = principal

A = future value = $50,000

n = number of periods = 4

r = interest rate = 6% = 0.06

t = time = 3 years

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

= 50,000 / (1 + 0.06/4)^4*3

= 50,000 / (1 + 0.015)^12

= 50,000 / (1.015)^12

= 50,000 / 1.1956

= 41,820.01

P = $41,820.01