You have a goal of having $100,000 five years from today. The return on the investment is expected to be 10% and will be compounded semi-annually. The amount that needs to be invested today is closest to:
A)$61,390.
B)$62,090.
C)$78,350.
D)$38,550.

Question

Quizplus · Accepted Answer

To find the present value, use the formula for compound interest: $ PV = \frac{FV}{(1 + r/n)^{nt}} $. Here, $ FV = 100,000 $, $ r = 0.10 $, $ n = 2 $, and $ t = 5 $. Plugging in these values gives $ PV = \frac{100,000}{(1 + 0.10/2)^{2*5}} \approx 61,390 $.

You Have a Goal of Having $100,000 Five Years from Today