Answer to Question #122903 in Financial Math for vaibhav

Question

You bought a sachet water machine from Indie Inc. The cost of the machine was GH¢35,000. At that time, you asked for the payment to be deferred, and a contract was written. Under the contract, you could delay paying for the sachet water machine if you purchased the material for packaging the water from Indie Inc. You will then pay for the machine in a lump sum at the end of 2 years, with interest at a rate of 2% per quarter-year. According to the contract, if you ceased buying the packaging material from Indie Inc. at any time prior to 2 years, the full payment due at the end of 2 years would automatically become due. One year later, you decided to buy the packaging material elsewhere and stopped buying from Indie Inc., whereupon Indie Inc., per the contract terms, asked for the full payment that is due at the end of 2 years to be paid immediately.

Answer 1

$$P(1+r)^n$$

$$35000(1+{1\over200})^8$$

$$=36424.74654$$

The intrest rate is $1\over200$ Because the amount is compounded quarterly $\therefore$

it is $÷ by 4$

The n which is time is multiplied by 4 because it is compounded quarterly.