"<span>A company will need 40,000 in 6 years for a new addition. To meet the goal, the company deposits money into an account today that pays 4% annual intrest compund quarterly." Let's pretend that the instructions state, "Determine the amount of money that must be deposited upfront so that you will have $40,000 in 6 years."
Use the Compound Amount formula: A = P(1 + r/n)^(nt), where P is the principal (the amount deposited upfront), r is the interest rate as a decimal fraction, n is the number of compounding periods, and t is the time in years.
Here, $40000 = P(1 + 0.04/4)^(4*6) $40000 So the upfront $ needed is P = ------------------------- (1+0.01)^24
