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Sandra wants to calculate how much money she needs to deposit today into a savings account which earns 5% in order to be able to withdraw $3,000 at the end of each of the next 6 years. She should use which present value concept?

Answer :

thaovtp1407

Answer:

$2238.64619

Explanation:

Let summary key information:

  • r = 5% per year
  • FV = $3,000  
  • n = 6 years.  

Present value is an important concept that is widely used in financial analysis and evaluation of investment projects or businesses. The principle of these assessments is to present the value of future cash flows generated by the project at an appropriate discount rate. We have fomula:

      PV = [tex]\frac{FV}{(1+r)^{n} }[/tex]

<=> PV = [tex]\frac{3000}{(1+0.05)^{6} }[/tex]  = 2238.64619

So she need to deposit $2238.64619 from now.

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