Pete Leary wants to attend College. Seven years from today he will need $30,000. If Pete's bank pays 5% interest compounded semiannually, what must Pete deposit today to have $30,000 in 7 years?
Pete Leary wants to attend College. Seven years from today he will need $30,000. If Pete's bank pays 5% interest compounded semiannually, what must Pete deposit today to have $30,000 in 7 years?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Pete Leary wants to attend College. Seven years from today he will need $30,000. If Pete's bank pays 5% interest compounded semiannually, what must Pete deposit today to have $30,000 in 7 years?
Expert Solution
Step 1
Present value refers to the current amount of the future payment in a specified period of time. It is helpful in the areas such as investment analysis, financial planning, and risk management and allows investors to judge whether the investment is profitable or not.
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