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

Question

Business

Guest

21 April, 19:52

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

+3

Answers (1)

Know the Answer?

Jonathan Ellison · Answer 1

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