Suppose you are committed to owning a $207,000 Ferrari. If you believe your mutu
ID: 2756866 • Letter: S
Question
Suppose you are committed to owning a $207,000 Ferrari. If you believe your mutual fund can achieve a 13 percent annual rate of return and you want to buy the car in 10 years on the day you turn 30, how much must you invest today? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)
Suppose you are committed to owning a $207,000 Ferrari. If you believe your mutual fund can achieve a 13 percent annual rate of return and you want to buy the car in 10 years on the day you turn 30, how much must you invest today? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)
Explanation / Answer
Formula for caculating Present value is:
PV- Present Value
FV- Future Value
r- rate of return
Present Value= Future Value/ (1+r)n
=$207000 / (1+0.13)10
The value for (1.13)10 will be 3.39456738
= $207000/ 3.39456738
=$ 60,979.78
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