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Buying a Car Michelle Christian wants to have a $20,000 down payment when she buys a new car in 6 years. How much money must she deposit at the end of each quarter in an account paying 3.2% compounded quarterly so that she will have the down payment she desires?

Respuesta :

Answer:

She should deposit $ 759 at the end of each quarter in an account.

Step-by-step explanation:

This problem requires us to calculate the amount that we should invest quarterly if the investment rate is 3.2% and we want 20,000 dollars after 6 years. This can be calculate easily with the help of annuity formula given below.

Future Value= Installment ((1+ interest rate)^time period-1)/interest rate

20,000 = Deposit ((1+ 3.2%/4)^24-1)/3.2%/4

PV = 20,000/26.34

PV = $ 759

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