Question

Mc McGili cuddy wished to invest Sum of money so that the interest each year would pay for this son's collage expenses If the money was invested at 8% and the Collage expenses were $10,000 per year, how should Mr, Mcgillicuddy invest?

Answer 1

$\begin{gathered} FV=PV(1+rt) \\ \text{Where:} \\ FV=\text{Future value} \\ PV=\text{Present value} \\ r=\text{rate} \\ t=\text{time} \end{gathered}$

So:

$\begin{gathered} FV=10000 \\ r=0.08 \\ t=1 \\ 10000=PV(1+0.08) \\ \text{Solve for PV:} \\ PV=\frac{10000}{1.08}=9259.259259 \end{gathered}$

He needs to invest $9259.259259