Answer:
Quarterly saving is $709.13
Interest value is $1,817.40
Step-by-step explanation:
A fix Payment for a specified period of time is called annuity. The Compounding of these payment on a specified rate is known as Future value of annuity.
We can calculate the amount of saving in each quarter Formula for Future value of annuity because we already have future value of $16,000
Future value of annuity = FV = P x ( [ 1 + r ]^n - 1 ) / r
Where
FV = $16,000
r = rate of return = 5%
n = number of years = 5 years 4 quarters each year = 20 quarters
Placing Value in the formula
$16,000 = P x ( [ 1 + 5%/4 ]^20 - 1 ) / 5%/4
$16,000 = P x 22.563
P = $16,000 / 22.563 = $709.13
Interest Amount = Future Value - Total Payment = $16,000 - (709.13 x 20) = $1,817.4
