You need $3000 annually (every year=annuity) for 3 years to give to European University of Lefke to graduate. How much money should your dad deposit today in a bank paying 5% so that you will have the needed $3000 annual payments?
You need $3000 annually (every year=
Future value is the amount of money invested for a number of the period with the assumed growth of investment at a certain rate of interest. It is better than holding the amount of cash at present because the value of money depreciates over the period of time due to inflationary measures and risk associated with the investment. Thus, the investor used to make an investment at present to earn adequate interest at a certain rate in the future. The formula for calculating the future value of money is shown below:
where,
FV=future value
PV=present value
r=rate of interest
n=number of years
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