Question

You want to have $11,000 in 8 years for a dream vacation. If you can earn an interest rate of .7 percent per month, how much will you have to deposit today?

Answer 1

The amount to be deposited today to have $11,000 in 8 Years

Here, we’ve Future Value = $11,000

Monthly interest rate (r) = 0.70% per month

Number of years (r) = 96 Months [8 Years x 12 Months]

Therefore, the Present Value = Future Value / (1 + r)n

= $11,000 / (1 + 0.0070)96

= $11,000 / (1.0070)96

= $11,000 / 1.95357088

= $5,630.71

“Hence, the amount to be deposited today will be $5,630.71”