Question

A merchant wants to have P2,000 to a small business for a period of 6 years. With a given interest rate on the investment of 15% compounded quarterly, how much will be the amount to invest?

-this is an compound interest

with solution

Answer 1

The formula for compound interest is given as follows -

Where A is the final amount, P is the principal amount invested, r is interest rate, n is the number of times the amount is compounded, t is the time for which money is invested

Here, we are given the final amount (the amount merchant wants after investing the money), A = 2000

r = 15% = 0.15

n = 4 and t =6

Putting the values in formula, we get,

P = 2000/2.419

P= 826.78

Thus,the merchant should invest 827 to get 2000 after 6 years given other factors in the question.