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ololo11 [35]
1 year ago
12

What amount must be invested today at an interest rate of 5. 5% compounded monthly, if you want to purchase a $550,000 machine 5

years in future?
Business
1 answer:
Schach [20]1 year ago
8 0

The amount that needs to be invested today at an interest rate of 5. 5% is determined to be $ 420,824.

Interest rate:

  • A fee charged by a lender to a borrower known as an interest rate is computed as a percentage of the principal, or the loaned amount. The annual percentage rate, or APR, is typically used to express the interest rate on a loan (APR).
  • Given, Future value of the car F=$ 550,000
  • Rate of interest (i) =5.5% per annum Interest time periods (n)=5 years.
  • PART 1:In the provided problem, the future worth of an automobile, the interest rate, and the length of the investment are all predetermined.
  • Calculating the amount that must be invested now in order to obtain cash equivalent to the car's future value at the conclusion of the investment period is required.
  • For this purpose, we will need to apply the PRESENT WORTH COMPUND AMOUNT FACTOR (PWCAF). This factor can be expressed as: P W C A F=\left(\frac{P}{F}, i, n\right)=\frac{1}{(1+i)^{n}}
  • PART 2:The total amount that needs to be invested today can be computed as: P=P W C A \times F=\frac{F}{(1+i)^{n}} \\
  • P=\frac{550000}{(1+5.5 \%)^{5}} \\
  • P=420824 [Rounded off to whole dollars]
  • Thus, the amount that needs to be invested today is determined to be:  $ 420,824

Learn more about interest rate here brainly.com/question/25793394

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