Question

Your client want to have $290,501 in 16 years, how much money should he put in a savings account today? Assume that the savings account pays you 5.7 percent and it is compounded annually. Round the answer to two decimal places

Answer 1

To have $290,501 in 16 years with a 5.7% annual compounded interest rate, the client must deposit $118,354.61 into a savings account today.

Step-by-step explanation:

To determine how much money should be put into a savings account today to have $290,501 in 16 years with an interest rate of 5.7% compounded annually, we can use the future value formula:

Future Value = Present Value (1 + rate)^number of periods

By rearranging the formula to solve for Present Value, we get:

Present Value = Future Value / (1 + rate)^number of periods

Plugging in the given values:

Present Value = $290,501 / (1 + 0.057)^16

After calculating the above expression:

Present Value = $290,501 / (1.057)^16 = $290,501 / 2.454636 = $118,354.61

The client needs to deposit $118,354.61 into the savings account today to have $290,501 in 16 years if the account pays 5.7% interest compounded annually.