Question

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.

Answer 1

"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

This comes out to $31502.65 (answer)