On January 1, 2014, Alan King decided to transfer an amount from his checking ac

Question

On January 1, 2014, Alan King decided to transfer an amount from his checking account into a savings account so that he will have $80,000 to send his son to college 7 years from now. The savings account will earn 5 percent interest.

How much must Alan deposit on January 1, 2014 in order to reach his goal? (Round your final answer to the nearest whole dollar amount.)

On January 1, 2014, Alan King decided to transfer an amount from his checking account into a savings account so that he will have $80,000 to send his son to college 7 years from now. The savings account will earn 5 percent interest.

Explanation / Answer

FV = PV(1+r)n

$80000 = PV(1+0.05)7

$80000/1.4071004227 = PV

PV = $56854.5064

Therefore, amount to be deposited by Alan on Jan 1, 2014 = $56855

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