Question

Jim Roznowski wants to invest some money now to buy a new tractor in the future. If he wants to have ​$350 comma 000 available in 6 ​years, how much does he need to invest now in a CD paying 4.35​% interest compounded monthly​?

Answer 1

$269,725.58

Step-by-step explanation:

The computation of the invested now amount i.e present value is shown below:

As we know that

Future value = Present value × (1 + interest rate)^number of years

where,

Future value is $350,000

Interest rate = 4.35% ÷ 12 months = 0.3625%

Number of years = 6 × 12 months = 72 months

So, the present value is

$350,000 = Present value × (1 + 0.3625%)^72

$350,000 = Present value × 1.2976151473

So, the present value is $269,725.58