Question

Racing Motors wants to save $825,000 to buy some new equipment three years from now. The plan is to set aside an equal amount of money on the first day of each quarter starting today. How much does the company need to save each quarter to achieve its goal if it can earn 4.45 percent on its savings

Answer 1

Answer:

It will have to save 51,224.05 to reach their financial goal of 825,000 in thre years at the given market rate

Explanation:

We have to solve for the annuity-due future value installment

$FV \div \frac{(1+r)^{time} -1}{rate}(1+r) = C$

FV $825,000.0000

time 12 (4 quartes x 3 years )

rate 0.0445

$825000 \div \frac{1-(1+0.0445)^{-12} }{0.0445} = C$

C  $ 51,224.043