Question

Finance questions about the time value of money, and the present value of a single amount:

1.a) Rossie received $17,000 from an inheritance, and he wants to invest it for the next 18 years. If he can earn 9.5% annually after tax, how much will his account be worth at the end of 11 years?

b) Joneisha needs a total of $700,000 in 10 years to pay for 4 years of college for her granddaughter. If she can earn 7.5% annually after tax on her growth mutual fund set aside for this purpose, what single amount does Joneisha need to invest today?

Answer 1

a.

Value at the end of year 11 = 17,000(1.095)¹¹

Value = $46,132.21

b.

Single Amount = 700,000/(1.075)¹⁰

Single Amount = $339,635.75