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Secure https.//www.mathxl.com/Student/PlayerTest.aspx?testld 1833980028centerwin yes BFN 201 Summer 2018 Brandon Schrowang &I; 7/21/18 5:38 PM Test: Multiple Chapter Test Chapters 4-5 graded Time Remaining: 01.23.08 Submit Tes This Question: 4 pts 11 of 28 (4 complete) This Test: 100 pts possibl (Future value) Sarah Wiggum would like to make a single lump-sum investment and have $2.1 milion at the time of her retirement in 35 years She has found a mutual Sarah eamed an annual retum of 15 percent, how much must she invest today? fund that expects to eam 4 percent annually. How much must Sarah invest today? It ?.lfSarah can earn 4 percent annually for the next 35 years, how much will she have to rvest today? s[g (Round to the nearest cent) ?. If Sarah can earn 15 percent annually for the next 35 years, how much will she have to most tday? (Round to the nearest cent)

Explanation / Answer

We need to compute the present value of the retirement amount. Present value of an amount can be computed as -

PV = Amount / (1 + r)n

where, r = rate of interest, n = no. of years

a) r = 4%, n = 35

PV = $2,100,000 / (1 + 0.04)35 = $532,172.49

b) r = 15%, n = 35

PV = $2,100,000 / (1 + 0.15)35 = $15,768.66

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