Question

Edward has decided to purchase a high- performance motorcycle. He'll need 9,500 in 3 years. His bank offers an interest rate of 8% compounded quarterly. How much does Edward need to deposit now to have enough money for his motorcycle in 3 years?

Answer 1

The formula is
A=p (1+r/k)^kt
A future value 9500
P present value?
R interest rate 0.08
K compounded quarterly 4
T time 3 years
We need to solve the formula for p
P=A÷(1+r/k)^kt
P=9,500÷(1+0.08÷4)^(4×3)
P=7,490.7 round your answer to get
P=7491