Question

Suppose you want to have $ 20,000 saved in 11 years. If you can earn4.29% annually on your funds, how much would you have to invest today to the nearest whole number to reachyour goal?O $12,659O $12,600O $ 12,400O $12,510

Answer 1

Step 1

Given; Suppose you want to have $ 20,000 saved in 11 years. If you can earn

4.29% on your funds.

Required; how much would you have to invest today to reach

your goal?

Step 2

The future value formula is given as;

$FV=PV(1+r)^n$$\begin{gathered} FV=20000 \\ r=\frac{4.29}{100}=0.0429 \\ n=11 \end{gathered}$$20000=PV(1+0.0429)^{11}$$\begin{gathered} PV=\frac{20000}{(1.0429)^{11}} \\ PV=12599.71302 \\ PV\approx\text{ \ 12600} \end{gathered}$

Answer; The present value or PV is;

$PV=\text{\ 12600}$