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27 June, 11:50

The amount a person would have to deposit today (present value) at an interest rate of 5 percent to have $1,000 five years from now.

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  1. 27 June, 15:27
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    The amount a person has to deposit today for it to be $1000 in 5 years at 5% is $783.52

    Explanation:

    We need to calculate what amount deposited today and compounded at 5% per year would add up to $1000 1 year from now, for that we will have to discount $1000 by 5% and 5 years using this formula.

    PV = FV / (1+Interest rate) ^N

    FV = 1,000

    Interest rate = 5%

    N = 5

    PV = 1,000 / (1.05) ^5

    PV = 783.52
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