Question

How much money should be invested in an account that earns 7% interest compounded quarterly to yield $10,000 in 3 years. Round to the nearest cent

Answer 1

`\$8,120.58`

1) We can tackle this question by inserting the data into the formula below, for interest compounded quarterly.

`A=P(1+(r)/(n))^(nt)`

2) So we can do this:

`\begin{gathered} 10000=P(1+(0.07)/(4))^(4\cdot3) \\ 10000=P(1.0175)^(12) \\ P\left(1.0175\right)^(12)=10000 \\ (P\cdot\:1.0175^(12))/(1.23143)=(10000)/(1.23143) \\ P=8120.58 \\ \end{gathered}`

Thus, $8,120.58 should be invested.