In her Trojan gift shop, Helen sells miniature horse statues. The manufacturer o
ID: 2726463 • Letter: I
Question
In her Trojan gift shop, Helen sells miniature horse statues. The manufacturer of these statues wants to upgrade its production facility in 3 years. They estimate that the cost of the upgrade will be $253,000. To achieve their goal, they will invest the same amount each quarter into an account at Goldman-Sachs. The annual interest rate is 10% and interest is compounded quarterly. a) How much should the manufacturer deposit each quarter into its account if they want to achieve their goal. b) How much interest does the manufacturer earn on its investment? In her Trojan gift shop, Helen sells miniature horse statues. The manufacturer of these statues wants to upgrade its production facility in 3 years. They estimate that the cost of the upgrade will be $253,000. To achieve their goal, they will invest the same amount each quarter into an account at Goldman-Sachs. The annual interest rate is 10% and interest is compounded quarterly. a) How much should the manufacturer deposit each quarter into its account if they want to achieve their goal. b) How much interest does the manufacturer earn on its investment? a) How much should the manufacturer deposit each quarter into its account if they want to achieve their goal. b) How much interest does the manufacturer earn on its investment?Explanation / Answer
Future value of annuity = P×[(1+r)^n-1]÷r
r is interest rate per period
P is payment per period
n is number of payments
$253,000 = P×[(1+(10%÷4))^(3×4)-1]÷(10%÷4)
Deposit in each quarter, P = $18,339.24
Interest earned:
= Balance after 3 years-Amount invested in 3 years
= $253,000-$18,339.24×12
= $32,929.12