Question

Barbara knows that she will need to buy a new car in 3 years . The car will cost $15000 by then. How much should she invest now at 8%, compound quarterly,so that she will have enough to buy a new car?

Answer 1

Answer:

Around $11827.40

Step-by-step explanation:

The formula for compounded interest is $A=P(1+\frac{r}{n})^{nt}$, where A is the desired amount, P is the amount you invest, r is the decimal rate, n is the number of times per year you compound the interest, and t is the number of years. You know A to be 15000, r to be 8% or 0.08, n to be quarterly or 4, and t to be 3. To find P, you can set up the following equation:

$15000=P(1+\frac{0.08}{4})^{4\cdot 3}$

$15000=P(1.02)^{12}$

$15000=1.2682P$

$P\approx 11827.40$ dollars

Hope this helps!