Question

Current Attempt in Progress Present value. On the first day of your college career you decide that you want to make one deposit into a mutual fund so that exactly four years later you have enough to purchase a car costing $30000. Given that the account will generate a yield of 4.7% interest compounded monthly, what should your initial deposit be in order to have that big pot of money at graduation? Round the answer to two decimal places. Check your answer by plugging into initial equation to be sure you would not be short of $30000. _____________ $

Answer 1

You will need to invest $24,867.52 at the beginning to reach the future value of $30,000.00.

Explanation:

a) Data and Calculations:

Future value for the purchase of a car = $30,000

Interest rate = 4.7%

Monthly interest = 0.39167% (4.7%/12)

Period of interest = 48 months (12 * 4)

FV (Future Value) $30,000

PV (Present Value) $24,867.52

N (Number of Periods) 48.000

I/Y (Interest Rate) 0.392%

PMT (Periodic Payment) $0.00

Starting Investment $24,867.52

Total Principal $24,867.52

Total Interest $5,132.48