The International Monetary Fund is trying to raise $1,250 billion in 6 years for

Question

The International Monetary Fund is trying to raise $1,250 billion in 6 years for new funds to lend to developing countries. At 6% interest compounded quarterly, how much must it invest today to reach $1,250 billion in 6 years? (Use the following provided Table.) (Do not round intermediate calculations. Enter your answer in billions of dollar rounded to 2 decimal places.)

The International Monetary Fund is trying to raise $1,250 billion in 6 years for new funds to lend to developing countries. At 6% interest compounded quarterly, how much must it invest today to reach $1,250 billion in 6 years? (Use the following provided Table.) (Do not round intermediate calculations. Enter your answer in billions of dollar rounded to 2 decimal places.)

Explanation / Answer

In 6 year, there are 4*6 = 24 quarterly periods. A rate of 6% per year is 6%/4 = 1.5%.

Apply the formula with A = 1250 billion

I = 0.015

N = 24

P = A /( 1+r)^n

=1250 billion /(1.015)^24

= 874.43 billion

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