Bevan wants to make an investment today so that, after 8 years at 6% per year, compounded quarterly, he will have $5500. What is the present value he need to invest today to reach his goal?

Question

Bevan wants to make an investment today so that, after 8 years at 6% per year, compounded quarterly, he will have $5500. What is the present value he need to invest today to reach his goal?

Answer 1

If R is the present value he needs, then R times (1+.06/4) raised to the 32nd power is $5,500. So R times 1.610324 is $5,500. So R is $3,415.46.The 32nd power is 8 years at 4 times per year.