 # Question & Answer: Tony Bautista needs \$23,160 in 2 years. (Use the tables below.)…..

Brief Exercise 6-2

Tony Bautista needs \$23,160 in 2 years. (Use the tables below.)

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Question & Answer: Tony Bautista needs \$23,160 in 2 years. (Use the tables below.)…..
GET AN ESSAY WRITTEN FOR YOU FROM AS LOW AS \$13/PAGE  What amount must he invest today if his investment earns 12% compounded annually? What amount must he invest if his investment earns 12% annual interest compounded quarterly? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)

 Investment at 12% annual interest \$ Investment at 12% annual interest, compounded quarterly \$ 1.We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

Hence

23160=P(1.12)^2

Hence P=\$23160/1.12^2

=\$23160/1.2544

=\$18,463(Approx).

2.We use the formula:
A=P(1+r/400)^4n
where
A=future value
P=present value
r=rate of interest
n=time period.

23160=P(1+12/400)^(4*2)

Hence

P=\$23160/1.03^8

=\$23160/1.26677

=\$18283(Approx).