Question

Pineapple Enterprises has an outstanding liability that will require them to pay Apple Co. $50,000 in 5 years. How much cash would Pineapple need to deposit today into an account, earning 8% interest, compounded quarterly, in order to have the amount needed in 5 years?

Answer 1

$33,648.57

Step-by-step explanation:

The computation of Required deposit today is given below:-

For computing the required deposit today first we need to find out the present value

Present value of 1 = (1 + i)^-n

= (1 + 0.02)^-20

= 0.67297133

Where, i = 8%/4

= 0.02

n = 5 × 4

= 20

Required deposit today = Future value × Present value of 1

= $50,000 × 0.672971

= $33,648.57