Your company needs $400,000 dollars in two years time for renovations and can ea
ID: 2833856 • Letter: Y
Question
Your company needs $400,000 dollars in two years time for renovations and can earn 8% interest on investments.
(a) What is the present value of the renovations?
Present value= _________________dollars
(b) If your company deposits money continuously at a constant rate throughout the tow-year period, at what rate should the money be deposited so that you have the $400,000 dollars when you need it?
Round your answers to 2 decimal places.
Money deposited at a rate of __________________dollars per rate
Explanation / Answer
a)P = F(i+i)^-n = 400000(1+0.08)^-2 = 400000*0.857 = $342,935.53
b)A= P((i(1+i)^2)/((1+i)^2)-1)) = $400000(0.56) = $224,340.99
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