Question

1) Find the lump that must be deposited today to have a future value of $ 25,000 in 5 years if funds earn 6 % componded annually.

Answer 1

Answer: $ 18681.45

Step-by-step explanation:

Given: Future value : $FV=\ 25,000$

The rate of interest : $r=0.06$

The number of time period : $t=5$

The formula to calculate the future value is given by :-

$\text{Future value}=P(1+i)^n$, where P is the initial amount deposited.

$\Rightarrow\ 25000=P(1+0.06)^5\\\\\Rightarrow\ P=\dfrac{25000}{(1.06)^5}\\\\\Rightarrow\ P=18681.4543217\approx=18681.45$

Hence, the lump that must be deposit today : $ 18681.45