If you wish to accumulate 140,000dollars in 13 years how much you deposit today in an account that pays an annual interest rate of 14%

Economics

ScanSolve AI Answer

Step-by-step solution

4 steps

Let's calculate how much you need to deposit today.

  1. Identify the formula for Present Value (PV).

    The formula to find the present value of a future sum is:
    PV = FV / (1 + r)ⁿ

    Where:
    PV = Present Value (the amount to deposit today)
    FV = Future Value ($140,000) r = Annual interest rate (14% or 0.14)
    n = Number of years (13)

  2. Substitute the given values into the formula.

    PV = 140,000 / (1 + 0.14)¹³

  3. Calculate the value.

    PV = 140,000 / (1.14)¹³
    PV = 140,000 / 5.40937
    PV = 25,880.88

  4. State the final answer.

    You would need to deposit $25,880.88 today.

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