Question

Use the present value formula to determine the amount to be invested now, or the present value needed.

the desire accumulated amounts is $140,000 after 2 years invested in an account with 8% interest compounded quarterly.

the amount to be invested now, or the present value needed is?

Answer 1

The amount to be invested now or the present value is $119,484.51

Explanation:

FV=PV(1+r/n)^nt

Make PV the subject of the formula

PV=FV/(1+r/n)^nt

Where,

PV=present value=?

FV=future value=$140,000

r=interest rate=8%

n=number of periods=4

t=time=2 years

PV=FV / (1+r/n)^nt

=140,000 / (1+0.08/4)^4*2

=140,000 / (1+0.02)^8

=140,000 / (1.02)^8

=140,000 / 1.1717

=119,484.5096

Approximately 119,484.51

PV=$119,484.51

The amount to be invested now or the present value is $119,484.51