Question

How much money should be deposited in an account that earns 5% compounded quarterly so that it will accumulate to $75,000 in 35 years assuing this deposit is a one time deal?

Answer 1

Given:

The compounded quarterly interest, r =5 % = 0.05 and n=4.

The amount accumulates after 35 years, A =75,000.

The period of time. t=35 years.

Required:

We need to find the deposited amount.

Explanation:

Let the deposited amount =P.

Consider the formula to find the amount in compounded interest.

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

Substitute n=4, r =0.05, t=35 and A=75000 in the formula to find the deposited amount.

$75000=P(1+\frac{0.05}{4})^{4\times35}$

Solve for P.

$75000=P\times5.69251$

$\frac{75000}{5.69251}=P$$P=13175.1873$

$P=13175.19$

Final answer:

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