Question

Daniel Bautista needs $21,000 in 6 years.

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What amount must he invest today if his investment earns 8% compounded annually? What amount must he invest if his investment earns 8% annual interest compounded quarterly? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)

Investment at 8% annual interest		$enter a dollar amount rounded to 0 decimal places
Investment at 8% annual interest, compounded quarterly		$enter a dollar amount rounded to 0 decimal places

Answer 1

Investment at 8% annual interest

PVF (6, 8%) = 0.63017

Present value = $21,000 * PVF (6 years, 8%)

= $21,000 * 0.63017

= $13,234

Investment at 8% annual interest, compounded quarterly

Time period = 6 * 4

= 24

Rate = 8% / 4

= 2%

PVF (24, 2%) = 0.62172

Present value = $21,000 * PVF (24, 2%)

= $21,000 * 0.62172

= $13,056