Given an interest rate of 9% guaranteed for the next 6 years, how much money would...
Given an interest rate of 9% guaranteed for the next 6 years, how much money would on need to be given presently as a lump sum in order to finance expenditures of $10,000 to occur at the end of each of the next 6 years?
Homework Answers
FV = $ 10000
I = 9% = 0.09
t = 6
Here is the formula:
PV = FV [1/(1 + I)t]
= 10000 [ 1/(1 + 0.09)6]
= 10000 [ 1/(1.09)6]
= 10000/1.68
= $ 5963
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