If you want to have $10,000 in 10 years,which of the following formulae represents how much money you must put in a savings account today? Assume that the savings account pays 6% and it is compounded monthly.
A)10,000/(1 + .05)10
B)10,000/(1 + .005)120
C)10,000/(1 + .06)10
D)10,000/(1 + .006)120

Question

Quizplus · Accepted Answer

The formula for calculating the present value of a future sum of money is PV = FV / (1 + r)n, where PV is the present value, FV is the future value, r is the interest rate, and n is the number of periods. In this case, FV = $10,000, r = 6%/12 = 0.005, and n = 10 x 12 = 120. Plugging in these values, we get PV = $10,000 / (1 + 0.005)120 = $6,139. Therefore, you would need to put $6,139 in a savings account today to have $10,000 in 10 years.

If You Want to Have $10,000 in 10 Years,which of the Following