How much would you have to deposit today if you wanted to have $54,000 in five y
ID: 2465313 • Letter: H
Question
How much would you have to deposit today if you wanted to have $54,000 in five years? Annual interest rate is 8%. (PV of $1. FV of $1. PVA of $1. and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your answer to the nearest whole dollar.) Assume that you are saving up for a trip around the world when you graduate in two years. If you can earn 7% on your investments, how much would you have to deposit today to have $14,500 when you graduate? (Round your answer to 2 decimal places.) Calculate the future value of an investment of $643 for eleven years earning an interest of 8%. (Round your answers to 2 decimal places.) Would you rather have $643 now or $1,000 eleven years from now? Now Eleven years from nowExplanation / Answer
a.
Future value = Amount required after 5 years = $54,000
Annual interest rate = 8%
Present value = Future value / (1 + Interest rate)No. of periods
Amount to be deposited today = $54,000 / 1.085 = $54,000 / 1.4693 = $36,752.20
b.
Amount required after 2 years from now = $14,500
Annual interest rate = 7%
Deposit today = $14,500 / 1.072 = $14,500 / 1.1449 = $12,664.86
c.
Value of investment now = $643
Annual interest rate = 8%
Period = 11 years
Future value = Present value * (1 + Interest rate)No. of periods
Value of investment after 11 years = $643 * 1.0811 = $643 * 2.3316 = $1499.22
d.
It is better to have $643 now because the value of $643 after 11 years is more than $1,000.
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