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31 March, 19:15

Suppose that you would like to put money in an account today to make sure your younger sibling has enough money in 10 years to buy a car. If you would like to give your sibling $20,000 in 10 years, and you know you can get 5% interest per year from a savings account during that time, how much should you put in the account now

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  1. 31 March, 22:27
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    The amount to be deposited today = $12,278.26

    Explanation:

    The amount to be deposited in the account is the present value of the 20,000 future value discounted at 5%.

    The formula is given below

    PV = FV * (1+r) ^ (-n)

    PV - Present Value, r - interest rate, n - number of years

    PV = 20,000 * 1.05^ (-10)

    The amount to be deposited today = $12,278.26
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