Suppose I want to save for a motor and you need $5000 two years from presently. What principle should I invest today at an annual rate of 2.5% compounded quarterly?
Answers: Present Value (PV) = Future Value (FV)/(1+i)^n
where i = compound interest rate and n the number of compounding period
where the interest rate is 2.5%/12 x 3 = .625% salaried quarterly and the number of coumpounding periods within two years is 8
PV = 5,000/(1+.025/12*3)^8 = $4,756.89
The PV is the principle amount required.
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Answers: Present Value (PV) = Future Value (FV)/(1+i)^n
where i = compound interest rate and n the number of compounding period
where the interest rate is 2.5%/12 x 3 = .625% salaried quarterly and the number of coumpounding periods within two years is 8
PV = 5,000/(1+.025/12*3)^8 = $4,756.89
The PV is the principle amount required.
Resolved Questions: