Question

Your sister just deposited $5,500 into an investment account. She believes that she will earn an annual return of 8.8 percent for the next 6 years. You believe that you will only be able to earn an annual return of 8 percent over the same period. How much more must you deposit today in order to have the same amount as your sister in 6 years

Answer 1

$5749.02

Step-by-step explanation:

The first step is to determine the future value of my sister's deposit

The formula for calculating future value:

FV = P (1 + r)^n

FV = Future value

P = Present value

R = interest rate

N = number of years

5500 (1.088)^6 = $9122.97

the second step is to determine the present value of $9122.97 using an interest rate of 8%

$9122.97 / (1.08)^6 = $5749.02