Narrative 11-1
Solve the following problems using either Tables 11-1 or 11-2 from your text. When necessary, create new table factors. (Round new table factors to five decimal places, round dollars to the nearest cent and percents to the nearest hundredth of a percent)
-Refer to Narrative in your text 11-1. Julia wants to have $11,500 in 10 years. Calculate how much she should invest now at 6% interest, compounded quarterly in order to reach this goal.
A) $6,339.49
B) $6,195.30
C) $6,304.71
D) $6,263.03

Question

Quizplus · Accepted Answer

To find out how much Julia should invest now to have $11,500 in 10 years at 6% interest compounded quarterly, we use the formula for the present value of a single sum: $PV = FV / (1 + r)^n$, where PV is the present value (initial investment), FV is the future value ($11,500), r is the quarterly interest rate (6% annual rate divided by 4, which is 0.015), and n is the total number of compounding periods (10 years times 4 quarters/year = 40 quarters). Plugging in the values: $PV = 11500 / (1 + 0.015)^{40}$. Calculating this gives a result close to $6,339.49, which means Julia should invest $6,339.49 now.

Narrative 11-1 Solve the Following Problems Using Either Tables 11-1 or 11-2