Sam Long anticipates he will need approximately $225,000 in 15 years to cover his 3-year-old daughter’s college bills for a 4-year degree. How much would he have to invest today at an interest rate of 8% compounded semiannually? (Use the Table provided.)
Sam Long anticipates he will need approximately $225,000 in 15 years to cover his 3-year-old daughter’s college bills for a 4-year degree. How much would he have to invest today at an interest rate of 8% compounded semiannually? (Use the Table provided.)
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
Related questions
Question
Sam Long anticipates he will need approximately $225,000 in 15 years to cover his 3-year-old daughter’s college bills for a 4-year degree.
How much would he have to invest today at an interest rate of 8% compounded semiannually? (Use the Table provided.) (Do not round intermediate calculations. Round your answer to the nearest cent.)

Transcribed Image Text:Present value interest factor of $1 per period at i% for n periods, PVIF(i,n).
Period
2.5%
5.5%
7.5%
10.0%
0.9091
0.5%
1.0%
1.5%
2.0%
3.0%
3.5%
4.0%
4.5%
5.0%
6.0%
6.5%
7.0%
8.0%
8.5%
9.0%
9.5%
0.9950 0.9901
0.9901
0.9851 0.9706
0.9852 0.9804
0.9707
0.9709 0.9662 0.9615
0.9335
0.9019
0.8714
0.9569 0.9524 0.9479 0.9434 0.9390 0.9346
0.8900
0.8516 0.8396
0.8072 0.7921
0.7473
0.7050
0.6651
0.6274 0.6042
0.5919
0.5584
0.5268
0.9302 0.9259 0.9217
0.8495
0.7829
1
0.9132
0.9756
0.9518
0.9286
0.9060
0.8839
0.9157 0.9070
0.8763 0.8638
0.8386
0.8817
0.8278
0.7773
0.9174
0.8417
0.7722
0.9803
0.9426
0.9151
0.8885
0.8626
0.8573
0.7938
0.7350
0.6806
0.8340
0.7617
0.6956
0.6352
0.5801
2
0.9612
0.9246
0.8985
0.8734
0.8163
0.7629
0.8653
0.8050
0.7488
0.8264
3
0.8890
0.9563
0.9422
0.9283
0.9420 0.9145
0.9327 0.9010
0.8877
0.9423
0.7513
0.9610
0.9515
4
0.9802
0.9238
0.9057
0.8880
0.8706 0.8413
0.8535 0.8207
0.8368 0.8007
0.8548
0.8219
0.7903
0.8227
0.7835
0.7462
0.7348 0.7107
0.7216
0.6650
0.6129
0.7084
0.6830
0.6209
0.7130
0.6663
0.6435 0.6227
0.9754
0.8420
0.8025
0.7651
0.7299
0.6966
0.6480
0.6028
0.6499
6
0.9705
0.8623
0.8375
0.8135
0.7679
0.7252
0.6853
0.5645
0.5963
0.5470
0.5019
0.4604
0.4224
0.3875
0.3555
0.3262
0.3405 0.3191 0.2992 0.2807 0.2633
0.3380 0.3152 0.2941 0.2745 0.2563 0.2394
0.6302
0.7599
0.7307
0.5835
0.5403
0.9657
0.8131
0.7860
0.6874
0.5649
0.5298
0.4838
0.5132
0.4665
0.9609 0.9235
0.7594
0.7894
0,7664
0.7441
0.7224
0.7014
0.7032
0.6768
0.6516
0.5820
0.5607
0.5207
0.9561
0.9513
0.9466
0.9419
0.8746
0.9053 0.8617
0.8963 0.8489
0.7337
0.7089
0.7026
0.6756
9
0.9143
0.5674
0.4799
0.6729
0.6439
0.6446
0.6139
0.5847
0.5568
0.5303
0.5400 0.5051 0.4726
0.6176
0.5854
0.5549
0.5260
0.5439
0.5083
0.5216
0.4852
0.4513
0.4199
0.3906 0.3677 0.3463
0.5002
0.4632
0.4289
0.4241
0.4418
0.4035
0.3855
0.3685
0.3505
0.3365
0.3186
0.3073 0.2897
10
0.8203
0.8043
0.7885
0.7812
0.7621
0.7436
0.5327
0.5002 0.4751
0.4697 0.4440
0.4410 0.4150
0.4141
0.4423
0.4076
0.3757
0.6849
0.6496
0.6162
0.5897
11
12
0.8874
0.8364
0.6618 0.6246
0.4970
0.3971
13
0.9372
0.8787
0.8240
0.7730
0.7579
0.7430
0.7254
0.6810
0.6394
0.6178
0.6006
0.5643
0.4986
0.4688
0.4423
14
0.9326
0.5775
0.8700
0.9279 0.8613 0.7999
0.9233 0.8528 0.7880 0.7284
0.8444 0.7764
0.8118
0.7077
0.6611
0.3878
0.3633
0.6419 0.5969 0.5553 0.5167 0.4810
0.4173 0.3888
15
16
17
0.6905
0.6736
0.6572
0.4479
0.3624
0.6232 0.5767 0.5339 0.4945 0.4581 0.4246 0.3936 0.3651
0.3144 0.2919 0.2711
0.2925 0.2703 0.2499
0.2720
0.2531
0.2354
0.2190
0.2519 0.2341
0.2311 0.2138 0.1978
0.1952
0.1783
0.1628
0.1487
0.1358
0.1240
0.1133
0.3387
0.3166
0.2959
0.2176
0.5572 0.5134
0.4936
0.4746
0.4564
0.3714 0.3428
0.3219
0.3022 0.2765
0.3118 0.2838 0.2584
0.3249 0.2942 0.2665 0.2415
0.9187
0.7142
0.7649 0.7002 0.6412
0.7536 0.6864 0,6255
0.6730 0.6103
0.6598
0.6468
0.6342
0.6995 0.6217
0.4363
0.4155
0.4333 0.3957
0.4146 0.3769
0.4388 0.3968 0.3589
0.4732
0.4528
0.6050
0.5874
0.5703
0.5537
0.5375
0.4024
0.3815 0.3503
0.8360
0.8277
0.8195
0.8114
0.8034
0.7954
0.7876
0.7798
0.2502
0.2317
0.2120
0.1945
0.1784
0.1637
18
0.9141
0.5384
0.2303
0.1799
19
0.9096
0.5202
0.3616
0.3305
0.2122
0.1635
20
0.9051
0.5026
0.3427
0.1486
0.7425
0.7315
0.7207
0.7100
0.2145
0.1956
0.5954
0.5809
0.5667
0,5529
0.5394
0.1803
0.1662
0.1531
0.1351
21
22
23
24
25
0.9006
0.8961
0.8916
0.8872
0.8828
0.4856
0.4692
0.1987
0.1839
0.1703
0.3079 0.2775 0.2502
0.2919
0.2767
0.2622
0.3797
0.1502
0.1378
0.1264
0.5219
0.4220
0.3418
0.3634 0.3256
0.3477 0.3101
0.3327 0.2953
0.3184 0.2812
0.3047 0.2678
0.2916 0.2551
0.2790 0.2429
0.2670 0.2314
0.2555 0.2204
0.2099
0.1999
0.2239 0.1904
0.2143 0.1813
0.1727
0.2257
0.2037
0.1228
0.1117
0.4533
0.4380
0.4231
0.2109
0.1971
0.1842
0.1722
0.1826 0.1609
0.2618
0.2470
0.2349
0. 2206
0.2071
0,5067
0.4057
0.1895
0.1763
0.1640
0.1525
0.1419
0.1320
0.1228
0.1142
0.1063
0.0988
0.4919
0.3901
0.1577
0.1412
0.1015
0.4776
0.4637
0.4502
0.6892
0.3751
0.3607
0.3468
0.1460
0.1301
0.1352 0.1199
0.1252 0.1105
0.1160
0.1064
0.0976
0.0895
0.6095
0.2330
0.1034
0.0923
0.7720
0.7644
0.8697 0.7568
0.5976 0.5262
0.5859 0.5134
0.5744
0.5631
0.5521
0.5412
0.5306
0.5202
02198
0.2074
0.1956
0.1846
0.1741
0.1643
0.1550
0.1462 0.1252
0.1379
0.1301
26
0.8784
0.6790
0.6690
0.4088
0.2486
0.1945
0.0945
0.0839
0.3950
0.3817
0.3687
0.3563
0.3442
0.3326
0.0863
0.0788
0.0763
27
28
29
30
31
32
0.8740
0.2356
0.2233
0.2117
0.2006
0.1902
0.1803
0.5009
0.6591
0.6494
0.6398
0.6303
0.6210
0.4371
0.4243
0.4120
0.4000
0.3883
0.3335
0.3207
0.3083
0.2965
0.2851
0.1715
0.1610
0.1512
0.1420
0.1333
0.1504
0.1406
0.1314
0.1228
0.1147
0.1159
0.1019
0.8653
0.8610
0.8567
0.8525
0.7493
0.7419
0.7346
0.7273
0.4887
0.4767
0.4651
0.0693
0.0630
0.0573
0.0521
0.1073
0.0939
0.0822
0.0754
0.0719
0.0994
0.0865
0.0920 0.0797
0.0852 0.0735
0.0657
0.0600
0.0634 0.0548
0.0691
0.4538
0.4427
0.2445
0.2340
0.0474
0.3770
0.3660
0.3554
0.3450
0.2741
0.2636
0.2534
0.2437 0.2050
0,2343
0.2706 0.2253
0.3817 0.3158 0.2614 0.2166 0.1797 0.1491
0.2083
0.0500
0.0457
0.0417 0.0356
33
0.8482
0.8440
0.8398
0.8356
0.8315
0.7201
0.7130
0.6118
0.3213
0.3105
0,3000
0.2898
0.2800
0.1709
0.1072
0.1002
0.1103 0.0937
0.0919
0.0789
0.0677
0.0582
0.0534
0.0431
0.6028
0.5939
34
0.5100
0.5000
0.5851 0.4902 0.4111
0.4319
0.4214
0.1620
0.1535
0.1455
0.1379
0.1175
0.0855
0.0796
0.0740
0.0730
0.0676
0.0626 0.0530
0.0580 0.0489
0.0624
0.0575
0.0391
35
36
37
0.7059
0.6989
0.6920 0.5764
0.0490
0.0449
0.1227
0.0323
0.3350
0.3252
0.0875
0.1036
0.0973 0.0818
0.0381
0.0348 0.0294
0.0318 0.0267
0.4806
0.4011
0.1962
0.1644
0.1878 0.1566
0.1158
0.0688
0.0412
0.0640 0.0537
0.0596 0.0497 0.0415
0.0554 0.0460 0.0383
0.0516 0.0426 0.0353
0.0395
0.0365
0.5679
0.0450
0.0378
0.0347
38
0.8274
0.6852
0.4712
0.3913
0.1307
0.1092
0.0914
0.0765
0.1239
0.1175
0.1031 0.0858
0.0972 0.0805
0.0917
0.6784
0.8191 0.6717
0.6650
0.6584
0.6519
0.6454
0.6391
0.6327
39
0.8232
0.5595
0.4619
0.0715
0.0243
0.0290
0.0318 0.0265 0.0221
0.0292 0.0242
0.0221
0.0202
0.0184
0.0168
0.0154
40
0.4529 0.3724
0.5513
0.5431
0.5351
0.5272
0.5194 0.4184
0.5117
0.5042
0.3066
0.2976
0.2890 0.2358
0.2805
0.2724
0.2526
0.2440
0.1719
0.1420
0.4440
0.4353
0.4268
0.0668
0.0624
0.0583
0.0545
0.0756
0.8151
0.8110
0.8070
0.8030
0.7990
0.3633
0.3545
0.3458
0.2003
0.1926
0.1852
0.1780
0.1645
0.1353
0.1113
0.1055
0.1000
0.0948
0.0899 0.0727
0.0852 0.0685 0.0552
41
0.0201
0.0268
0.0246
0.0183
0.0166
0.1574
0.1288
0.0865
0.0710
0.0816 0.0667
0.0770 0.0626
0.0480
0.0325
42
43
0.1507
0.1227
0.1442 0.1169
0.1380 0.1113
0.1320
0.2278
0.0300
0.0276
0.0446
44
0.3374
0.2201
0.0509
0.0415
0.0338
0.0313
0.0290
0.0226
0.0151
0.2127
0.2055
0.1712
0.1646
0.0476
0.0254
0.0235
0.0216
0.0199
45
0.4102
0.3292
0.2644
0.0588
0.0386
0.0207
0.0137
0.3211
0.3133
0.3057
0.0445
0.0416
0.0487 0.0389
0.4022
0.2567
0.1060
0.1009
0.0961
0.1157 0.0916
0.1107 0.0872 0.0688 0.0543
46
0.0190
0.0125
0.7950
0.7910
0.7871
0.0359
0.0334
0.0311
0.0289
0.0339 0.0269
47
0.0518
0.6265
0.6203
0.4967
0.3943
0.3865
0.2493
0.2420
0.1985
0,1918
0.1583
0.1263
0.1209
0.0807
0.0647
0.0610
0.0269
0.0249
0.0174
0.0140
0.0113
0.0103
48
0.4894
0.0765
0,1522
0.1463
0.0160
0.0128
49
0.7832
0.6141
0.4821
0.3790
0.2982
0.2350
0.1853
0.0725
0.0575
0.0457
0.0363
0.0230
0.0184
0.0147
0.0117
0.0094
50
0.7793
0.6080
0.4750 0.3715
0.2909
0.2281
0.1791
0.1407
0.0429
0.0213
0.0169 0.0134 0.0107
0.0085
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