Question

If you wish to accumulate $140,000 in 6 years, how much must you deposit today in an account that pays a quoted annual interest rate of 11% with monthly compounding of interest?

Answer 1

$72,405

Step-by-step explanation:

PV: Present value (The amount of deposit today)

FV: Future Value

i/r: Interest rate

PMT: The amount of money you have to deposit monthly. In this question, this amount is 0.

FV = $140,000

n = 6 years = 6x12 = 72 months

i/r = 11%/year = 0.92%/month

PMT = 0

PV = ?

By inputting all these given info into financial calculator, we have the following:

PV = $72,405

OR we can perform the calculation manually:

PV = 140,000 / (1+0.0092)^72 = $72,045