Question

Find the lump sum deposit which will give $3,092 in 10 years in an account paying 5.01% compounded quarterly.

Answer 1

$A=P(1+\frac{r}{n})^{nt}$

P= balance at the beginning of deposits.

r=annual interest rate in decimal form=5.01%=0.0501

n=number of compounding periods in one year=4 in this case since it is compounded quarterly

t=number of years=10 years.

$A=P(1+\frac{r}{n})^{nt}$

$3092=P(1+\frac{0.0501}{4})^{4×10}$

$3092=P(1+0.012525)^{40}$

$3092=P(1.012525)^{40}$

$3092=1.64524P$

$P=1879.36$

lump sum deposit $=1879.36dollar$