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John Bautista needs $23,800 in 10 years. Click here to view factor tables What amount must...

John Bautista needs $23,800 in 10 years. Click here to view factor tables What amount must he invest today if his investment earns 12% compounded annually? What amount must he invest if his investment earns 12% annual interest compounded quarterly? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)

Investment at 12% annual interest $

Investment at 12% annual interest, compounded quarterly $

Solutions

Expert Solution

Answer:
a)
Present Value   =   Future value / FV ( 12%, 10 Periods )
                                =    $ 23, 800 / 3.10585
                                =     $ 7,663
Investment at 12% Annual interest    = $ 7,663
b)
Present Value   =   Future value / ( 1 + i) ^ n
Where, I = 12% / 4 Quarters   = 0.03
                 n =   10 x 4    =   40 Periods
Present Value   =   Future value / ( 1 + i) ^ n
                                =    $ 23,800 / ( 1 + 0.03 ) ^ 40
                                =     $ 23,800 / 3.26204
                                =      $ 7,296
Investment at 12% annual interest, compounded quarterly = $ 7,296

ekkarill92 answered 2 years ago
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