A man expects to receive P125,000 in 8 years. How much must he invest now considering an interest rate of 12% compounded quarterly.
Question
A man expects to receive P125,000 in 8 years. How much must he invest now considering an interest rate of 12% compounded quarterly.
Solution
To solve this problem, we need to use the formula for the future value of an investment compounded quarterly, which is:
FV = PV * (1 + r/n)^(nt)
Where: FV = future value of the investment PV = present value of the investment (what we're trying to find) r = annual interest rate (in decimal form) n = number of times interest is compounded per year t = number of years the money is invested for
We know that FV = P125,000, r = 12% or 0.12 (in decimal form), n = 4 (since interest is compounded quarterly), and t = 8 years. We can plug these values into the formula and solve for PV:
P125,000 = PV * (1 + 0.12/4)^(4*8)
Solving the equation for PV gives us the amount the man must invest now.
Similar Questions
Find the amount due at the end of 2 1/2 years if P 8,000.00 is invested at 12% simple interest.
A young engineer borrowed P12,000 at an interest rate of 10 percent per annum. Find the lump sum that he will pay at the end of 4 years.
Kishore invested Rs. 50000 in 12% per annum compound interest where the interest is calculated quarterly. What is the approximate amount received by him at the end of one year?Question 16Answera.Rs. 56275b.Rs. 66275c.Rs. 56285d.Rs. 59275
Simple and compound interestBeing able to discount future cash flows using a compound interest rate is a critical skill.What is the present value of an investment that pays you $1,200 in 5 years’ time where annual interest rates are 8% compounded annually?
An interest rate of 10% compounded continuously is desired of an investment of P15,000. How many years will be required to recover the capital with the desired interest if P2,500 is received each year?
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.