Question

USE THE PRESENT VALUE FORMULA TO CALCULATE THE AMOUNT OF MONEY THAT MUST BE INVESTED NOW AT 9% ANNUALLY COMPOUNDED QUARTERLY TO OBTAIN 1,000 IN 4 YEARS.

Answer 1

The amount of money that must be invested is $252.

Explanation:

Present value formula:

The present value formula is given by:

`P = (F)/((1+r)^n)`

In which:

P is the present value.

F is the future value.

r is the interest rate.

n is the number of periods.

9% ANNUALLY

This means that
`r = 0.09`

COMPOUNDED QUARTERLY TO OBTAIN 1,000 IN 4 YEARS.

Obtain 1000 means that
`F = 1000`

Compounded quarterly in 4 years, so 4*4 = 16 periods and
`n = 16`.

Amount of money that must be invested:

`P = (F)/((1+r)^n)`

`P = (1000)/((1+0.09)^(16))`

`P = 252`

The amount of money that must be invested is $252.