Question

"Suppose you wish to have $5,500 in 18 years. Use the present value formula to find how much you should invest now at 6% interest, compounded annually in order to have $5,500, 18 years from now."

Answer 1

Answer:

The amount of investment should be $1926.891 approximately

Explanation:

The following formula has been used to calculate the amount of investment

A = P(1+r/100) ^n

where: A = future value , P = present value , R = rate of interest , N = time period

Hence , applying the formula, we get,

$5500 = P (1+6/100) ^18

Hence P=$5500/ (1.06) ^18

=$1926.891(approx)