The International Monetary Fund is trying to raise $1,350 billion in 8 years for

Question

The International Monetary Fund is trying to raise $1,350 billion in 8 years for new funds to lend to developing countries. At 8% interest compounded quarterly, how much must it invest today to reach $1,350 billion in 8 years? (Use the Table provided.) (Do not round intermediate calculations. Enter your answer in billions of dollar rounded to 2 decimal places.)

Present Value? $_______ billion

Present value interest factor of $1 per period at 196 for n periods. PVIF(in 0.8278| 0.8163 | 0.8050| 07938 710 06227| 0.6 0.5835 0.7441 | 0.7089 | 0.6756| 0.6439| 0.6139 | 0.5854| 0.5584| 0.5327| 0.5083 | 0.48 04289 04423| 041 0.31441 0.2919 341 04732| 04363| 04024 | 0.3714 | 0.3428 0.316 0742 64| 0.4146 0.3769 0.3427 31 181 0.2 0.7954 | 0.7100 | 0.6342| 0.5667 0.1703| 0.1531| 0.1378 9191 0.4380 0.1577 1609| 0.1419| 0.1 2429 | 0.2117 | 0 1846| 0.1610 | 0140 0.2314 34 | 0.8440| 0.71 0.04491 0.03811 00323 1644| 0.1379| 011 0.5431 43 | 0.8070 5451 0.04461 44 | 0.8030 2724| 0.2201 0445 15831 0.12631 0.10 0117| 0

Explanation / Answer

Solution:

Amount is given A = 1350

rate of interest = 8% = 0.08

time t = 8 year

compunded quaterly thus n = 4

A = PV ( 1+r/n)^nt

1350 = PV ( 1+0.08/4)8x4

PV = 1350 / ( 1.02)32

= $ 716.35 Billion

Present Value =716.3549 = $ 716.36 billion

Answer

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