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March 25, 2017

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A house is rented for $2000 per quarter, with each quarter's rent payable in advance. If money is worth 2%, compounded quarterly, and the rent is deposited in an account, what is the future value of the rent for one year?

  • math - ,

    Assume 2% is per quarter (not per annum).
    so R=1.02, n=4 quarters, and rent, P=$2000.

    Future value
    P(R+R^2+R^3+R^4)
    = PR(1+R+R^2+R^3)
    =PR (R^4-1)/(R-1)
    =2000*1.02*(1.02^4-1)/(1.02-1)
    =$8408.08

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