Question

b. Brenda Young desires to have $8,000 eight years from now for her daughter’s college fund. If she will earn 7 percent (compounded annually) on her money, what amount should she deposit now? Use the present value of a single amount calculation.

Answer 1

To find the amount Brenda should deposit now for her daughter's college fund, we can use the present value of a single amount formula.

Step-by-step explanation:

To find the amount Brenda should deposit now, we can use the present value of a single amount formula. The formula is given by:

PV = FV / (1 + r)^n

Where PV is the present value, FV is the future value, r is the interest rate, and n is the number of years. In this case, Brenda wants to have $8,000 in 8 years and will earn 7% interest compounded annually. Plugging in the values into the formula:

PV = 8000 / (1 + 0.07)^8

Calculating this, the present value she should deposit now is approximately $5,242.24.

Answer 2

$4, 656. 10

Step-by-step explanation:

To get the amount that Brenda needs to invest, we use a re-arranged formula for calculating future values

PV = FV

(1+r)n

Pv = present value

FV= 8000

r =7 percent or 0.07

n=8

PV = $8000

(1+0.07)8

PV=$8000/1.7181861

PV = $4,656.07

Brenda must deposit $4, 656.1