Question

Shane wants to invest money in a CD account that compounds semiannually at 6% annual rate. Shane would like the account to have a balance of $100,000 four years from now. How much must Shane deposit to accomplish his goal? A) $78.941 B) $88,849 C) $25,336 D) $22.510

Answer 1

Answer:

The correct answer is A.

Explanation:

Giving the following information:

Shane wants to invest money in a CD account that compounds semiannually at a 6% annual rate. Shane would like the account to have a balance of $100,000 four years from now.

To calculate the present value we need to use the following formula:

PV= FV/(1+i)^n

i=0.06/2=0.03

n= 4*2=8

PV= 100,000/ (1.03)^8

PV= 78,940.92