Question

4. Suppose your retirement goal is to accumulate $400 in 2.5 years. How much do you need to deposit in the bank today to meet your goal if the bank offers an interest rate 5.65%

Answer 1

PV= $348.65

Step-by-step explanation:

Giving the following information:

Future Value= $400

Interest rate= 5.65% = 0.0565

Number of periods= 2.5 years

To calculate the initial investment, we need to use the following present value formula:

PV= FV/(1+i)^n

PV= 400 / (1.0565^2.5)

PV= $348.65