Question

Brenda young desires to have 15000 eight years from now, if she will earn 5 percent compound annually on her money, what should she deposit now?

Answer 1

Step-by-step explanation:

We are told that Brenda wants to have $15,000 in 8 years and her money will earn 5% compound interest annually.

We need to figure out how much she should deposit now. We'll call that amount the present value (PV).

The formula for present value is:

• PV = FV / (1 + r)^t

Where:

• FV is the future value, or the amount she wants in 8 years ($15,000)
• r is the interest rate (0.05 or 5% expressed as a decimal)
• t is the number of time periods (8 years)

Plugging in the values:

PV = 15,000 / (1 + 0.05)^8

PV = 15,000 / 1.493

PV = $10,064

So Brenda should deposit $10,064 now in order to have $15,000 in 8 years, assuming a 5% annual compound interest rate.

The formula works because the $10,064 will grow to $15,000 over 8 years at 5% interest, compounded annually.

The key steps are:

• Determining the present value formula
• Identifying the given values: future value, interest rate, number of years
• Plugging those values into the formula
• Calculating the present value amount Brenda should deposit