Question

You want to have $12,500 in 10 years for a dream vacation. If you can earn an interest rate of .3 percent per month, how much will you have to deposit today?

Answer 1

$8,778

Step-by-step explanation:

To find the amount of money that you will have to deposit today, you have to use the formula to calculate the present value:

PV=FV/(1+i)^n

PV= present value

FV= future value= 12,500

i= interest rate= 0.003*12(to calculate the rate per year)= 0.036

n= number of periods of time= 10

PV=12,500/(1+0.036)^10

PV=12,500/1.424

PV=8,778

According to this, you will have to deposit today $8,778.