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In 2 years, Pablo wants to buy a bicycle that costs 600.00. If he opens a savings account that earns 8% interest compounded quarterly, how much will he have to deposit as principal to have enough money in 2 years to buy the bike?

Solution

Solution

Principal : 512.09

Solution steps

Translate the problem into an equation:

600 = P (1 + \frac{0.08}{4})^{4 \cdot 2}

Solve for

P, 600 = P (1 + \frac{0.08}{4})^{4 \cdot 2} : P = 512.09

Principal : 512.09

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