In 3 years, Ronald wants to buy a bicycle that costs 700.00. If he opens a savings account that earns 2% interest compounded quarterly, how much will he have to deposit as principal to have enough money in 3 years to buy the bike?

Soluzione

I n 3 ye a rs, R o na l d w an t s t o b u y a bi cyc l e t ha t cos t s 700.00. I f h e o p e n s a s a v in g s a cco u n t t ha t e a r n s 2% in t eres t co m p o u n d e d q u a r t er l y, h o w m u c h w i ll h e ha v e t o d e p os i t a s p r in c i p a l t o ha v e e n o ug h m o n ey in 3 ye a rs t o b u y t h e bik e ?

Principal : 659.33

Fasi della soluzione

Translate the problem into an equation:

700 = P (1 + \frac{0.02}{4})^{4 \cdot 3}

Risolvi per

P, 700 = P (1 + \frac{0.02}{4})^{4 \cdot 3} : P = 659.33

Principal : 659.33