contestada

You need to have $31,000 in 11 years. You can earn an annual interest rate of 3 percent for the first 3 years, 3.6 percent for the next 2 years, and 4.3 percent for the final 6 years. How much do you have to deposit today

Respuesta :

sebastiansierraocm

Answer:

$8,986

Explanation:

To find this answer, we will use the future value of an investment formula:

FV = PV(1 + i)^n

Where:

  • FV = Future Value (In this case, the value that we need to have in 11 years)
  • PV = Present Value (Will be the unknown value)
  • i = interest rate
  • n = number of compounding periods

We will use one version of the formula for each period that falls under a different interest rate, and the value of n will be equal to the number of years that the specific interst rate is valid.

The layout of the formula is:

31,000 = PV (1 + 0.03)^3 + PV (1 + 0.036)^2 + PV (1 + 0.043)^6

31,000 = PV (3.45)

31,000 / 3.45 = PV

8,968 = PV

Thus, in order to have $31,000 in 11 years under the set of conditions, you must deposit $8,968 today.

Otras preguntas