Question

Suppose you are committed to owning a $203,000 Ferrari. If you believe your mutual fund can achieve an annual rate of return of 11 percent and you want to buy the car in 8 years on the day you turn 30, how much must you invest today

Answer 1

the present value is $88,087.08

Step-by-step explanation:

The computation of the present value is shown below:

As we know that

Future value = Present value × (1 + rate of interest)^number of years

$203,000 = Present value × (1 + 0.11)^8

So, the present value is $88,087.08

hence, the present value is $88,087.08