Homework Help: Math

Posted by Anonymous on Monday, November 7, 2011 at 2:49pm.

Alice requires $10,000 in two years. If the interest rate is 6% and compounded
quarterly, how much must Alice place in the account to have the required amount? (a) $ 6,274.10 (b) $ 8,877.10 (c)$ 8,573.40 (d) $ 5,000.00 (e) $ 10,000.00

Math - Henry, Wednesday, November 9, 2011 at 3:53pm
Pt = Po(1+r)^n.

r = (6% / 4) / 100% = 0.015 = QPR expressed as a decimal.

n = 4comp/yr * 2yrs = 8 Compounding periods.

$10,000 = Po(1.015)^8,
Po = 10,000 / (1.015)^8 = $8877.11.

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