Question

Beginning three months from now, you want to be able to withdraw $3,400 each quarter from your bank account to cover college expenses over the next four years. If the account pays .56 percent interest per quarter, how much do you need to have in your bank account today to meet your expense needs over the next four years? (

Answer 1

Answer:

You need to have in your bank account $607,142.9 to get $3,400  each quarter

Explanation:

To calculate the inicial amount of money in your bank you need to take into account that fo calculating an interest you multiply the percentaje by the initial amount.

Interest = Initial amount x interest x time

We have the following variables

Interest = $3,400

Initial amount = What we want to know

Interest = 0.56% = 0.0056 per quarter

Time = 1 quarter.

$3,400 = Initial amount x 0.0056 x 1       Clear the initial amount

$\frac{3400}{0.0056 x 1} = Initial amount$   Solve the operation

$607,142.9 = Initial amount

You need to have in your bank account $607,142.9 to get $3,400  each quarter