Question

Suppose you need to have $59,241.00 in an account 23.00 years from today and that the account pays 7.00%. How much do you have to deposit into the account 4.00 years from today?

Answer 1

Future Value to be in account 23 years from today = $59,241

First, Calculate the Present Value today of Future amount in 23 years:-

where, Future Value = $59,241

r = interest rate = 7%

n = no of years = 23

Present value today = $12,496.70

Now, Calculating its Future value in 4 years from Present value today:-

Future Value = Present Value*(1+r)^n

where,

r = interest rate = 7%

n = no of years = 4

Future Value = $12496.70*(1+0.07)^4

= $12496.70*1.31079601

= $16,380.62

So, amount you need to deposit into the account 4.00 years from today is $16,380.62

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