Question

Problem 4-39 General TVM (LG2, LG4)

Ten years ago, Hailey invested $1,900 and locked in a 7 percent annual interest rate for 30 years (end 20 years from now). Aidan can make a 20-year investment today and lock in a 8 percent interest rate.

How much money should he invest now in order to have the same amount of money in 20 years as Hailey?(Do not round intermediate calculations and round your final answer to 2 decimal places.)

Present value

$

Answer 1

Value of investmentof hailey at end of 30 years =FVF 7%,30 *A

             = 7.61226*1900

              = $ 14463.294

Amount to investment today by aidan = Future value of hailey investment *PVF 8%,20

                         = 14463.294 * .21455

                          = $ 3103.10