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Interest rate problem

An environmental testing company needs to purchase $40,000 worth of equipment 2 years from now. At an interest rate of 20% per year, compounded quarterly, the present worth of the equipment is closest to?

A. $27,070
B. $27,800
C. $26,450
D. $28,220

Solution Preview

Hi, Here we need to find the principle amount.

Here is the formula , Quarterly A = P (1 + r/4)^n4 = (quarterly compounding for n years)

Where A is the Amount, P is the principal amount , r is the interest rate and n -is ...

Solution Summary

This shows how to determine present worth of equipment.