You need to have $32,750 in 5 years. You can earn an annual interest rate of...
You need to have $32,750 in 5 years. You can earn an annual interest rate of 6 percent for the first 3 years, and 6.6 percent for the next 2 years. How much do you have to deposit today? $19,006.21 $19,863.53 $24,472.71 $24,197.99 $23,791.69
Homework Answers
| We need $ 32,750 in Five years it means we have to calculate the present value of this value | |||||||
| Years | PVF of $ 1 | Remarks | |||||
| Year 1 | 0.94340 | =1 / 1.06 | |||||
| Year 2 | 0.89000 | Year 1 Value /1.06 | |||||
| Year 3 | 0.83962 | Year 2 Value /1.06 | |||||
| Year 4 | 0.78764 | Year 3 Value /1.066 | |||||
| Year 5 | 0.73887 | Year 4 Value /1.066 | |||||
| Present Value of investment = PVF of $ 1 at the end of 5th year X $ 32,750 | |||||||
| Present Value of investment = | 0.73887 | X | $ 32750 | ||||
| Present Value of investment = | $ 24,197.99 | ||||||
| Answer = Option 4 = $ 24,197.99 | |||||||
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