How much would you need to deposit in an account now in order to have $2000 in the account in 5 years? Assume the account earns 6% interest compounded quarterly. Round your answer to the nearest cent.

Question

How much would you need to deposit in an account now in order to have $2000 in the account in 5 years? Assume the account earns 6% interest compounded quarterly. Round your answer to the nearest cent.

Answer 1

A=P(1+r/n)^nt

where r=interest rate = 6%= .06

t = number of years = 6

n= number of compounding times per year = 4 for quarterly compounding

plug into the formula and solve for P

2000= P(1+.06/4)^4(6)

use a calculator

P = 2000/(1.015)^24

P = $1399.09 rounded off to nearest cent