Question

Barbara knows that she will need to buy a new car in 3 years . The car will cost $15000 by then. How much should she invest now at 8%, compound quarterly,so that she will have enough to buy a new car?

Answer 1

Around $11827.40

Explanation:

The formula for compounded interest is
`A=P(1+(r)/(n))^(nt)`, where A is the desired amount, P is the amount you invest, r is the decimal rate, n is the number of times per year you compound the interest, and t is the number of years. You know A to be 15000, r to be 8% or 0.08, n to be quarterly or 4, and t to be 3. To find P, you can set up the following equation:

`15000=P(1+(0.08)/(4))^(4\cdot 3)`

`15000=P(1.02)^(12)`

`15000=1.2682P`

`P\approx 11827.40` dollars

Hope this helps!