Miranda wants to open a flower shop in four years. After completing her planning

Question

Miranda wants to open a flower shop in four years. After completing her planning process, Miranda estimates she will need $50,000 to start her business. How much money must she set aside today if she can earn 6 percent compounded semiannually?

Kylee is 22 years old and just finished college. She would like to purchase a house by the time she turns 30. If she put aside $2,500 each quarter starting today and earned an interest rate of 8 percent, how much money will Kylee have available for a down payment?

Explanation / Answer

1)

Semiannual rate = 6/2 = 3%

Lets say she put aside = P

P*1.03^3 + P*1.03^2 + P*.103 + P = 50,000

P*4.183627 = 50,000

P = $ 11,951.35

2) rate per quarter = 8/4 = 2%

Ans = 25,00*1.02^31 + 25,00*1.02*30 +.......2500

Ans = $ 110,567.574

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