Question

You wish to have $2000 in 3 years to buy a fancy new stereo system. How much

should you deposit each quarter into an account paying 6% compounded quarterly?

Answer 1

The correct answer is - $1977.7913.

Explanation:

Given:

Maturity value = 2000

time = 3 years

rate = 6% compounded quarterly

Solution:

If A is the Maturity Value, P is the Principal Amount, r is the Rate of Return, n is the Frequency And t is the Time in Year then the Formula for Compound Interest would be -

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

Putting the given values in formula,

2000 = P*(1 + (0.06/4))^(3*4)

P = 2000/(1 + (0.06/4))^(3*4)

Thus,

P = $1977.7913