Bob and Joy Salkind want to save $50,000 in 5 ½ years for home improvement projects. If the Bank of Aventura is paying 8% interest compounded quarterly, how much must the couple deposit now to have the money for the projects?

Answer 1

P = Po(1+r)^n.

P = $50,000

r = (8%/4)/100% = 0.02 = Quarterly % rate expressed as a decimal.

n = 4comp./yr * 5.5yrs. = 22 Compounding periods.

Plug the above values into the given Eq and solve for Po.