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Math

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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 -

    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.

  • Math -

    How much compound interest will an account of $12,000 bear after 6 years at 3.2% APR, compounded annually? (Hint: Use the formula for annual compound interest.)

    $2,496.38
    $14,496.38
    $1,896.38
    $496.38

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