Question

You have a goal of having $270,000 four years from today. The return on the investment is expected to be 8% and will be compounded semi-annually. The amount that needs to be invested today is closest to: (FV of $1,PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided.)

A) $180,000.
B) $197,989.
C) $135,000.
D) $197,289.

Answer 1

Answer:D $197,289

Step-by-step explanation:

Compounding a present value for a future sum is calculated thus:

FV= PV(1+r/n)^nt

FV= $270,000

Rate= 8%

Time= 4yrs

Compounded semi annually

$270,000= PV(1+0.08/2)^2*4

270,000=PV(1.04)^8

270,000=PV(1.368569050405)

270,000/1.3685690504052736

PV= 197,289