In 3 years, Tisha wants to buy a bicycle that costs 1, 000.00. If she opens a savings account that earns 15% interest compounded quarterly, how much will she have to deposit as principal to have enough money in 3 years to buy the bike?

Solution

Solution

Principal : 642.9

Solution steps

Translate the problem into an equation:

1000 = P (1 + \frac{0.15}{4})^{4 \cdot 3}

Solve for

P, 1000 = P (1 + \frac{0.15}{4})^{4 \cdot 3} : P = 642.9

Principal : 642.9

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