Question

1. Angelo wants to renovate his house in 3 years. He estimates the cost to be ₱300,000. How much must Angelo invest now at 8% interest compounded quarterly, in order to have ₱300,000, 3 years from now?

Answer 1

Answer:

Angelo must invest ₱236.55

Explanation:

Let x be the amount Angelo must invest, then we have time, t = 3 years, rate, r = 8%, number of times compounded annually, n = 4

Using the formula:

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

we have:

$\begin{gathered} 300=x(1+\frac{0.08}{4})^{4\times3} \\ \\ 300=x(1.02)^{12} \\ \\ x=\frac{300}{1.02^{12}}=236.55 \end{gathered}$