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15 March, 02:20

Michael Peterson is seeking to accumulate $25,000 in six years to invest in a real estate venture. He can earn 6.35 percent annual interest with monthly compounding in a private investment. How much will he have to invest today to reach his goal?

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Answers (2)
  1. 15 March, 02:52
    0
    17624
  2. 15 March, 04:17
    0
    He will have to invest $17,624 today to reach his goal

    Explanation:

    Accumulated value = Future Value = FV = $25,000

    Rate of Interest = r = 6.35% = 0.0635

    Number of Year = n = 6 years

    Amount Invested today = PV = ?

    FV = PV x (1+r) ^n

    $25,000 = PV (1 + 0.0635) ^6

    $25,000 = PV (1.0635) ^6

    $25,000 = PV x 1.41852

    PV = $25,000 / 1.41852

    PV = $17,624.01

    PV = $17,624
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