Question

For the following investment, calculate the present value (principal) and the compound interest. Round your answers to the nearest cent.

Compound Amount	Term of Investment	Nominal Rate (%)	Interest Compounded	Present Value	Compound Interest
$130,000	14 years	8	annually	$	$

Answer 1

Compound Amount	$130,000
Term of Investment	14 years
Nominal Rate	8%
Interest Compounding	Annually
Present Value	$44,259.94
Compound Interest	$85,740.06

Present Value = Compound Amount/(1+r)^n

Present Value = 130000/(1+8%)^14 = $44,259.94

Compound Interest = Compound Amount – Present Value

Compound Interest = $130,000 - $44,259.94 = $85,740.06