Question

(5 points) How much do you need to invest in an account earning an annual interest rate of 5.904% compounded weekly, so that your money will grow to $7,120.00 in 43 weeks? The amount you need to invest is (Note: Your answers should include a dollar sign and be accurate to two decimal places)

Answer 1

This question requires application of basic time value of money function, according to which FV = PV * (1 + r)" where FV is Future Value, PV is present value, n is number of periods and r is rate per period

r = 5.904%/52 = 0.1135% (weekly) [Since number of weeks in a year = 52]

$7,120 = PV * (1 + 0.1135%)⁴³

$7,120 = PV * 1.050004

PV = $6,780.93