Question

You will require $620 in 5 years. If you earn 5% interest on your funds, how much will you need to invest today in order to reach your savings goal? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

Present value of money invested = 485.79 (Approx)

Step-by-step explanation:

Given:

Future value = $620

Number of years = 5 years

Present value = ?

Rate of interest = 5% = 5/100 = 0.05

Computation of Present value of money invested:

Present value =
`(Future\ value)/((1+r)^n)\\\\`

`Present \ value = (Future\ value)/((1+r)^n)\\\\Present \ value = (620)/((1+0.5)^5)\\\\Present \ value = (620)/((1.5)^5)\\\\Present \ value = (620)/(1.277628156)\\\\Present \ value =485.786224`

Present value of money invested = 485.786224

Present value of money invested = 485.79 (Approx)