Question

You need to have $34,500 in 14 in years. You can earn an annual interest rate of 5 percent for the first 4 years, 5.6 percent for the next 3 years, and 6.3 percent for the final 7 years. How much do you have to deposit today

Answer 1

Calculate the present value of the deposit is as follows:

Future value = Present value x (1+ Rate) Number of Years

`34,500 = Present value * (1 + 0.05)^(4) * (1 + 0.056)^(3) * (1 + 0.063)^(7)`

`34,500 = Present value * (1.05)^(4) * (1.056)^(3) * (1.063)^(7)`

Present Value = $34,500/2.1952390

Present Value = $15,715.83

Therefore, the present value of the deposit is $15,715.83