Present and future value tables of $1 at 3% are presented below: 1 1.03000 0.970

Question

Present and future value tables of $1 at 3% are presented below: 1 1.03000 0.97087 1.00000.97087 1.0300 1.00000 2 1.06090 0.94260 2.03001.91347 2.09091.97087 3 1.092730.91514 4 1.12551 0.88849 4.1836 3.71710 4.3091 3.82861 5 1.15927 0.86261 5.30914.57971 5.4684 4.71710 6 1.19405 0.83748 6.46845.41719 6.6625 5.57971 71.22987 0.81309 8 1.26677 0.78941 8.89237.01969 9.1591 7.23028 9 1.30477 0.76642 10.15917.78611 10.4639 8.01969 10 1.34392 0.74409 11.46398.53020 11.80788.78611 11 1.38423 0.72242 12.80789.25262 13.1920 9.53020 12 1.425760.70138 14.1920 9.95400 14.6178 10.25262 13 1.46853 0.68095 15.617810.63496 16.0863 10.95400 14 1.51259 0.66112 17.086311.29607 17.5989 11.63496 15 1.55797 0.64186 18.5989 11.93794 19.1569 12.29607 16 1.604710.62317 20.1569 12.56110 20.7616 12.93794 3.0909 2.828613.1836 2.91347 7.6625 6.23028 7.8923 6.41719 Carol wants to invest money in a 6% CD account that compounds semiannually. Carol would like the account to have a balance of $120,000 8-years from now. How much must Carol deposit to accomplish her goal?

Explanation / Answer

We use the formula:

A=P(1+r/200)^2n

where

A=future value

P=present value

r=rate of interest

n=time period.

120,000=P(1+0.06/2)^(2*8)

P=$120,000/(1+0.06/2)^(2*8)

=$120,000/1.60471

=$74779.87(Appox).

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