The amount needed is future value (FV).
FV = 18,904
Number of years = n = 10
Rate of interest = r = 0.06
Number of quarters in a year (a gap of three months) = m = 4
Present value = PV =?
FV = PV (1 + (r/m)) ^ (m × n)
18,904 = PV (1 + (0.06/4)) ^ (4 × 10)
18,904 = PV (1 + 0.015) ^ 40
18,904 = PV × 1.015 ^ 40
18,904 = PV × 1.8140
18,904 / 1.8140 = PV
PV = 10,421.17 (Answer)
Interest earned = FV – PV
= 18,904 – 10,421.17
= 8,482.83 (Answer)
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