Question

Jane Roznowski wants to invest some money now to buy a new tractor in the future. If she wants to have ​$250,000 available in 6 ​years, how much does she need to invest now in a CD paying 4.65​% interest compounded monthly​?

Answer 1

Present Value= $189,236.98

Step-by-step explanation:

Giving the following information:

Future value= ​$250,000

Number of years= 6

Interest rate= 4.65​% compounded monthly​

First, we need to calculate the real interest rate:

Interest rate= 0.0465/12= 0.003875

Now, using the following formula, we can calculate the initial inventment:

PV= FV/ (1+i)^n

n= 6*12= 72

PV= 250,000/(1.003875^72)

PV= $189,236.98