Calculate the present value of $118,000, if the money is discounted at 11 percen

Question

Calculate the present value of $118,000, if the money is discounted at 11 percent? (Round "PV Factor" to 3 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.)

Present Value?

Which choice should you choose?

Calculate the present value, if you had to wait until 12 years to get the $118,000. (Round "PV Factor" to 3 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.)

Present Value?

Now, which choice should you choose?

Your aunt offers you the choice of $118,000 in 10 years or $40,000 today.

Explanation / Answer

a)

According to my calculations, if you expect to earn a 11.000% interest rate, compounded annually, you will need to deposit/invest $41,557.77 now in order for your investment to grow to $118,000.00 over the course of the next 10 years.

The following chart shows how $41,557.77 will grow to $118,000.00.

The following chart shows how $33,729.22 will grow to $118,000.00.

Year Interest Future Value Present Value $41,557.77 1 $4,571.35 $46,129.12 2 $5,074.20 $51,203.33 3 $5,632.37 $56,835.69 4 $6,251.93 $63,087.62 5 $6,939.64 $70,027.26 6 $7,703.00 $77,730.25 7 $8,550.33 $86,280.58 8 $9,490.86 $95,771.45 9 $10,534.86 $106,306.31 10 $11,693.69 $118,000.00 Totals $76,442.23 $118,000.00

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