Mr. Smith wishes to retire in 16 years. When he retires he would like to have $300,000 in his bank account. Mr. Smith's bank pay
s 8% per year compounded annually. How much should he deposit now to attain his goal?
1 answer:
Answer:
$87,567.14
Explanation:
For computing the amount deposited for attaining the goal we need to apply the present value which is to be shown in the attachment
Provided that,
Future value = $300,000
Rate of interest = 8%
NPER = 16 years
PMT = $0
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
So, after applying the above formula, the present value is $87,567.14
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Answer:
$880.31
Explanation:
For computing the new price of the bond we need to apply the present value formula i.e to be shown in the attachment
Given that,
Assuming Future value = $1,000
Rate of interest = 8.6% ÷ 2 = 4.3%
NPER = 8 years × 2 =
PMT = $1,000 × 6.5% ÷ 2 = $32.5
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
So, after applying the above formula, the present value is $880.31
