Mathew knows that he will need to buy a new car in 4 years. The car will cost $15,000 by then. How much should he invest now at 10%, compounded quarterly, so that he will have enough to buy a new car?

Question

Focker

Mathematics

27 August, 08:35

Mathew knows that he will need to buy a new car in 4 years. The car will cost $15,000 by then. How much should he invest now at 10%, compounded quarterly, so that he will have enough to buy a new car?

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Answers (2)

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Skye Barron · Answer 1

Mathew should invest $10,104.37.

A = $15,000 future value

A = P (1 + r/4) ^n

P = A / ((1 + r/4) ^n)

P = 15000 / ((1 + 0.10/4) ^16)

P = $10,104.37

Teagan Buck · Answer 2

So let's start with the cost of the car

It would be 15,000 in 4 years.

Now that we have that, we will now multiply 4 by 10%, which will equal 40.

Now, divide 40 by 15000 to get to 3750