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March 27, 2017

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You want to refurnish your home in 3 years. The interior decorator informs you that this will cost $25,000. What should be your payment into an account that gives 6% compounded quarterly?

  • algebra - ,

    25000(1+.06)^4*3

    I think that is how you would set it up.

    You may want to wait for a math tutor to verify.

  • algebra - ,

    the quarterly rate will be .06/4 = .015

    let the payment you make now be $x
    so
    x(1.015)^12 = 25000
    x = 25000/(1.015^12
    = 20909.69

    or you could use the formula

    PV = Amt(1+i)^-n

    present value = 25000(1.015)^-12
    = 20909.69

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