Solve the problem

Question

How much money should be deposited today in an account that earns 11% compounded quarterly so that it will accumulate to $6200 in 10 years?

	$18,351.22
	$4105.32
	$2094.68
	$2183.54

Answer 1

6200 = A(1+ .11/4)^4(10)

6200 = A(1.0275)^40

A = 6200/(1.0275)^40

You can eliminate the first choice as it's larger than 6200, but it gives you an interesting clue. It seems to be the number you'd get if you mixedup the initianl amount with what it grew to in 10 years. It's about 3 times as much 18351.22/6200 = about 2.9538

6200/3 = about 2067

the 3rd choice looks right, even without doing the full calculations. It's either that or the last choice

6200/2.9538 = about $2100. 3rd choice is closest $2094.68

if in a hurry on a time pressure test, go with that answer

if you have more time, do the full calculation of (1+ .11/4)^40 and divide it into 6200

using a calculator seems to show approximately $2094.66