Answer:
Instructions are listed below.
Explanation:
Giving the following information:
A) How much would you have to deposit today if you wanted to have $54,000 in five years? The annual interest rate is 8%.
We need to use the following formula:
PV= FV/(1+i)^n
PV= 54,000/(1.08^5)= $36,751.49
B) Assume that you are saving up for a trip around the world when you graduate in two years. If you can earn 7% on your investments, how much would you have to deposit today to have $14,500 when you graduate?
PV= 14,500/1.07^2= $12,664.86
C) Calculate the future value of an investment of $643 for eleven years earning an interest of 8%.
FV= PV*(1+i)^n
FV= 643*1.08^11= $1,499.24
D) Would you rather have $643 now or $1,000 eleven years from now?
It depends on the interest rate. We will assume 8%.
PV= 1000/1.08^11= 428.88
It is better to have $643 today.
