You want to refurnish your home in 3 years. The interior decorator informs you that this will cost $25,000. What should be your payment into an account that gives 6% compounded quarterly?

Question

You want to refurnish your home in 3 years.  The interior decorator informs you that this will cost $25,000.  What should be your payment into an account that gives 6% compounded quarterly?

Chopsticks · Answer

25000(1+.06)^4*3 I think that is how you would set it up. You may want to wait for a math tutor to verify.

Reiny · Answer

the quarterly rate will be .06/4 = .015

let the payment you make now be $x
so
x(1.015)^12 = 25000
x = 25000/(1.015^12
= 20909.69

or you could use the formula

PV = Amt(1+i)^-n

present value = 25000(1.015)^-12
= 20909.69