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Kyle wants to buy a car for $9200 in 2 years and 7 months time. How much does he have to invest today at j4 = 3.5% using the Practical method.

I feel like I'm doing it right but the answer is not correct.

9200 = P(1+0.035/4)10(1+0.035(1/12))

8407.90 = P

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    What is the "practical method"? Sounds like something textbook-specific (and nonsensical). This is a mathematical question with an exact answer *if* you know how often the interest is compounded, or if it is compounded continually. The *method* by which you derive the exact answer *should* be irrelevant. – 2017-01-10
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    That's unfortunate, I don't even know why they are teaching this... The equation is S = P(1+i)^n(1+ik) if that helps at all. – 2017-01-10
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    How does your textbook define "practical method"? (Check the last many pages, the glossary if there is one, the index, and the table of contents, in that sequence.) Also I'm not sure what $j_4$ means but I would expect this convention to be explained in your book. – 2017-01-10
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    j4 means the 3.5% rate is compounded quarterly – 2017-01-10
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    Hmmm, in that case I have no idea why $(1+ik)$ is part of the equation. Two questions: (1) Where did you get the exponent $10$? And (2) Where did you make use of the figure, "$2$ years and $7$ months"? – 2017-01-10
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    @wildcard 2 years 7 months = 31 months or $10\frac 13$ quarters. – 2017-01-10
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    @DougM, ha, missed that. Right. I still don't know about the $(1+ik)$ part of the equation, though. Why should the interest get compounded one month into the 11th quarter rather than only after a full additional quarter? – 2017-01-10
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    I am supposed to find the amount of period which is 10 and 1/3. But the equation tells me to use the floor of that which is exponent 10. The i is simply 0.035 and k is the remainder of the period divided by the compounding which is 0.333333/4 – 2017-01-10
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    @AlexVincent Why do you think the answer is not correct ? In my view the calculation and the result is correct. – 2017-01-10

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