Question

Suppose that you desire to get a lump-sum payment of $100,000 three years from now.

Answer 1

It is for three years so, the interest that you collect is (12 x 12 x 3 x S)/100

where S is the amount you invest. So,

100,000 = S + (12 x 12 x 3 x S)/100

By solving, you get S = 18,797

Hope it helps. feel free to ask any doubts.

Answer 2

Answer:

You would need an initial investment of $71,178.02

Step-by-step explanation:

Great question, it is always good to ask away and get rid of any doubts that you may be having.

Based on the question we can see that this is a compounding interest problem, therefore we can use the Exponential Growth Formula in order to solve this. The formula is the following.

$F = a*(1+r)^{t}$

Where:

• F is the final price/payment
• a is the initial deposit
• r is the interest rate in decimal format
• t is the time

Now that we have the formula we can plug in the values given to us in the question and solve for the initial amount (a).

$100,000 = a*(1+0.12)^{3}$

$100,000 = a*1.404928$ .... divide both sides by 1.404928

$71,178.02 = a$

We can see from the calculations above you would need an initial investment of $71,178.02

I hope this answered your question. If you have any more questions feel free to ask away at Brainly.