Answer:
He must deposit $1,119.26 per quarter for 7 years.
Explanation:
Giving the following information:
Future value= $40,000
Number of years= 7
Interest rate= 7% compounded quarterly.
First, we need to determine the real interest rate:
Real interest rate= 0.07/4= 0.0175
Now, using the following formula, we can calculate the investment required quarterly:
FV= {A*[(1+i)^n-1]}/i
A= deposit
Isolating A:
A= (FV*i)/{[(1+i)^n]-1}
A= (40,000*0.0175) / [(1.0175^28)-1]
A= $1,119.26
He must deposit $1,119.26 per quarter for 7 years.
