Question

Carol plans to invest some money so she has $4,200 at the end of the 3 years. Determine how much she invest today given the following choices: (Do not round intermediate calculations and round your final answer to the nearest penny.)

a. 4.2 percent compounded daily

Amount required to be invested: $

b. 4.9 percent compounded monthly

Amount required to be invested: $

c. 5.2 percent compounded quarterly

Amount required to be invested: $

d. A 5.4 percent compounded annually

Amount required to be invested: $

Answer 1

a.Information provided:

Future value= $4,200

Time= 3 years*365= 1,095 days

Interest rate= 4.20%/365= 0.0115% per day

The question is solved by calculating the present value.

Enter the below in a financial calculator to compute the present value:

FV= 4,200

N= 1,095

I/Y= 0.0115

Press the CPT key and PV to compute the present value.

The value obtained is 3,702.8092.

Therefore, $3,703 needs to be invested today.

b. Information provided:

Future value= $4,200

Time= 3 years*12= 36 months

Interest rate= 4.90%/12= 0.4083% per month

The question is solved by calculating the present value.

Enter the below in a financial calculator to compute the present value:

FV= 4,200

N= 36

I/Y= 0.4083

Press the CPT key and PV to compute the present value.

The value obtained is 3,626.9201.

Therefore, $3,627 needs to be invested today.

c. Information provided:

Future value= $4,200

Time= 3 years*4= 12 quarters

Interest rate= 5.20%/4= 1.30% per month

The question is solved by calculating the present value.

Enter the below in a financial calculator to compute the present value:

FV= 4,200

N= 12

I/Y= 1.30

Press the CPT key and PV to compute the present value.

The value obtained is 3,596.9628.

Therefore, $3,597 needs to be invested today.

d. Information provided:

Future value= $4,200

Time= 3 years

Interest rate= 5.40%

The question is solved by calculating the present value.

Enter the below in a financial calculator to compute the present value:

FV= 4,200

N= 3

I/Y= 5.40

Press the CPT key and PV to compute the present value.

The value obtained is 3,586.9676.

Therefore, $3,587 needs to be invested today.

In case of any query, kindly comment on the solution.