Kim wishes to have $5,000.00 for a vacation she wishes to take in 3 years. She...

Question

Question

Kim wishes to have $5,000.00 for a vacation she wishes to take in 3 years. She can invest her money at 6% compounded annually

Answer 1

Answer #1

Here we will use the following formula:

FV = PV * (1 + r%)ⁿ

where, FV = Future value = $5000, PV = Present value, r = rate of interest = 6%, n= time period = 3

now, putting theses values in the above equation, we get,

$5000 = PV * (1 + 6%)³

$5000 = PV * (1 + 0.06)³

$5000 = PV * (1.06)³

$5000 = PV * 1.191016

PV = $5000 / 1.191016

PV = $4198.10

So, she needs to invest $4198.10 today.

Answer 2

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