At your brother’s 20th birthday party, he asks you how much he would have to deposit at the end of every quarter to finance a $8,500 motorcycle on his 25th birthday. He plans to put the money in a 12% savings account that compounds interest quarterly.

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At your brother’s 20th birthday party, he asks you how much he would have to deposit at the end of every quarter to finance a $8,500 motorcycle on his 25th birthday. He plans to put the money in a 12% savings account that compounds interest quarterly.

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Darshita6.14K 0 Comments

The future value interest factor of an ordinary annuity of $1 per month for 20 quarters (five years) at 3% per quarter (12% per year) is 26.870.

 

Then $8,500/26.870 = $316.34 must be deposited at the end of each quarter.

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