A company will need $45,000 in 8 years for a new addition. To meet this goal, the company deposits money in an account today that pays 11 % annual interest compounded quarterly. Find the amount that should be invested to total $45,000 in 8 years.

The amount that should be invested to total $45,000 in 8 years is $18,995.

Explanation:

According to the situation, you have to calculate the amount that you have to invest in the present to get $45,000 in eight years. You can find it using the formula:

P = F / (1 + (i/n)) ^nt

P = present value

F = future value: $45,000

i = interest: 11%

n = number of times compounded per year: 3

t = time in years

P = $45,000 / (1 + (0.11/3)) ^ (8*3)

P = $45,000 / (1+0.0366) ^24

P = $45,000/2.369

P = $18,995