Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company needs to have $150,000 in 5 years,and will create a fund to insure that the $150,000 will be available.If it can earn a 6% return compounded annually,how much must the company invest in the fund today to equal the $150,000 at the end of 5 years?
A)$141,000
B)$112,095
C)$100,000
D)$45,000
E)$105,000

Question

Present Value of 1  Future Value of 1  Present Value of an Annuity of 1  Future Value of an Annuity of 1  A company needs to have $150,000 in 5 years,and will create a fund to insure that the $150,000 will be available.If it can earn a 6% return compounded annually,how much must the company invest in the fund today to equal the $150,000 at the end of 5 years?
A)$141,000 
B)$112,095 
C)$100,000 
D)$45,000 
E)$105,000

Quizplus · Accepted Answer

We can use the formula for present value of a single amount: PV = FV/(1+i)^n, where PV is the present value, FV is the future value, i is the interest rate, and n is the number of periods. Plugging in the values, we get:
PV = 150,000/(1+0.06)^5
PV = 112,094.69
So the company must invest $112,094.69 in the fund today to have $150,000 in 5 years. Therefore, the best choice is (B) $112,095.