Question

supposee you start saving today for a $8000 down payment that you plan to make on a condo in 4 years. Assume that you make no deposits into the account after your initial deposit. The account has quarterly compounding and an APR of 6%. How much would you need to deposit now to reach your $8000 goal in 4 years

Answer 1

Answer:

$7537.22

Step-by-step explanation:

The compound interest quarterly formula is:

$A=P(1+r/4)^4^n$

where A is the $8000 goal to reach after 4 years, P is the initial amount needed to deposit, r is the APR and n is the time in years. WE need to solve for P:

$P=A/(1+r/4)^4^n$

$P=8000/(1+0.06/4)^4$

$P=8000/1.0614=7537.22$

$7537.22 must be deposited