a. How much would you have to deposit today if you wanted to have $40,000 in fiv
ID: 2603571 • Letter: A
Question
a. How much would you have to deposit today if you wanted to have $40,000 in five years? Annual interest rate is 8%. (Pyof$1. Evof $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your answer to the nearest whole dollar.) Present value b. Assume that you are saving up for a trip around the world when you graduate in three years. If you can earn 7% on your investments, how much would you have to deposit today to have $10,000 when you graduate? (Round your answer to 2 decimal places.) Present value c-1. Calculate the future value of an investment of $486 for eleven years earning an interest of 8%. (Round your answer to 2 decimal places) Future valueExplanation / Answer
You want an investment to have a value of $40,000 in 5 years. The account will earn 8% per year. You want to know the value of your investment now to achieve this or, the present value of your investment account.
Investment Value in 5 years FV = $40,000
Interest Rate R = 8%, r = 0.0625
Number of Periods (years) t = 5
Compounding per Period (per year) m = 1
PV = FV [1/(1 + I)t]
PV=$40,000[1/ (1+.08)] ^5 =$27,223.33
Year Interest Future Value
Present Value $27,223.33
1 $2,177.87 $29,401.19
2 $2,352.10 $31,753.29
3 $2,540.26 $34,293.55
4 $2,743.48 $37,037.04
5 $2,962.96 $40,000.00
Totals $12,776.67 $40,000.00
2.
PV = FV [1/(1 + I)t]
PV=$10000[1/(1+.07)]^3
Year Interest Future Value
Present Value $8,162.98
1 $571.41 $8,734.39
2 $611.41 $9,345.79
3 $654.21 $10,000.00
Totals $1,837.02 $10,000.00
3.
FV=PV(1+i)^n
FV interest factor= 2.33164
=486(1+.08)^11= $1,133.18
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