Lashonda wants to save money to buy a motorcycle. She invests in an ordinary annuity that earns interest, compounded quarterly. Payments will be made at the end of each quarter. How much money will she need to pay into the annuity each quarter for the annuity to have a total value of after years

Missing information:

interest rate earned = 2.4%

price of motorcycle = $5,000

time = 3 years

$403.09

Explanation:

annuity payment = future value / {[(1 + r)ⁿ - 1] / r}

future value = $5,000

r = 2.4% / 4 = 0.6%

n = 3 x 4 = 12

annuity payment = $5,000 / {[(1 + 0.006)¹² - 1] / 0.006} = $5,000 / 12.4040 = $403.09

Lashonda will need to invest $403.09 every three months in order to save $5,000 by the end of the third year.

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