Question

Suppose you want to deposit a certain amount of money into a savings account and then leave it alone to draw interest for the next 10 years. At the end of 10 years you would like to have $10,000 in the account. How much do you need to deposit today to make that happen?

Answer 1

PV= FV / (1 + i)^n

Step-by-step explanation:

Giving the following information:

Number of periods (n)= 10 years

Future value (FV)= $10,000

We were not provided with the interest rate. I will assume an interest rate of 7% compounded annually.

To calculate the initial investment, we need to use the following formula:

PV= FV / (1 + i)^n

PV= 10,000 / (1.07^10)

PV= $5,083.49

Initial investment= $5,083.49