compound interest account

Question

The "Present Value" of a compound interest account is the amount of money you need to invest in the account today to accumulate A dollars. You can calculate Present Value by solving for P in the compound interest formula above. Calculate the Present Value (what you would need to invest) if you wanted to accumulate $10,000 by investing in an account for 8 years that pays 6% interest compounded monthly. If you'd like, pose some other Present Value problems for the class to solve

Answer 1

F = P(1+i)^t where i is annual % interest as a decimal and t is in years

P = F/(1+t)^t and, in this case: P = 10000/(1.06)⁸

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