You would like to give your daughter $75,000 towards her college education 17 years from now. How much money must you set aside today for this purpose if you can earn 8 percent on your investments?
Present value = $75,000 × [1/(1 + .08)17] = $20,270.17
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37.
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You want to have $25,000 saved 6 years from now to buy a house. How much less do you have to deposit today to reach this goal if you can earn 5.5 percent rather than 5 percent on your savings? Today's deposit is the only deposit you will make to this savings account.
Present value = $25,000 × [1/(1 + .05)6] = $18,655.38
Present value = $25,000 × [1/(1 + .055)6] = $18,131.15 Difference = $18,655.38 - $18,131.15 = $524.24 |
38.
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Your older sister deposited $5,000 today at 8.5 percent interest for 5 years. You would like to have just as much money at the end of the next 5 years as your sister will have. However, you can only earn 7 percent interest. How much more money must you deposit today than your sister did if you are to have the same amount at the end of the 5 years?
Future value = $5,000 × (1 + .085)5 = $7,518.28
Present value = $7,518.28 × [1/(1 + .07)5] = $5,360.43 Difference = $5,360.43 - $5,000 = $360.43 |
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