A problem is listed below. Identify its type. Ted owns a small florist shop. Since his business is booming, his realizes he will soon need one more delivery van. He decides he will purchase a full size van versus a minivan, which he currently owns. The van he is looking to buy in 2 years will cost him $33,000. How much should he invest each quarter into an account that pays 4% per year compounded quarterly, so that he can have the desired funds in 4 years?

Quarterly deposit = $1,912.17

Explanation:

Giving the following information:

The van he is looking to buy in costs $33,000.

Interest rae = 4% per year compounded quarterly

Number of years = 4 years

First, we need to calculate the real interest rate:

Interest rate = 0.04/4 = 0.01 per quarter

Now, to calculate the quarterly deposit, we need to use the following formula:

FV = {A*[ (1+i) ^n-1]}/i

A = quarterly deposit

Isolating A:

A = (FV*i) / {[ (1+i) ^n]-1}

A = (33,000*0.01) / [ (1.01^16) - 1]

A = $1,912.17