Molly Scupper wants to attend Clarke University. She will need $90,000 6 years from today. Assume Molly's bank pays 6% interest compounded quarterly. What must Molly deposit today to have $90,000 in six years? Verify your answer.

Question

Layne Hanna

Mathematics

7 September, 16:38

Molly Scupper wants to attend Clarke University. She will need $90,000 6 years from today. Assume Molly's bank pays 6% interest compounded quarterly. What must Molly deposit today to have $90,000 in six years? Verify your answer.

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Answers (1)

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Everett Stephens · Answer 1

This is similar to exponential growth problems ...

F=Ir^t F=final, I=initial, r=rate, t=time,

The main difference here is that the annual rate is compounded quarterly so

90000=I (1+.06/4) ^ (4t)

90000=I (1.015) ^ (4t) and since t=6 we have:

90000=I (1.015^24)

I=$62,958.95

verify ...

F=62958.95 (1.015^24)

F=$89999.996

F=$90000.00 rounded to nearest cent