Marco needs $175,000 six years from today. How much should Marco deposit today into an investment account that provides a 12% annual return in order to accomplish his goals?
A) $89,523
B) $88,660
C) $85,487
D) $62,500

Question

Quizplus · Accepted Answer

To find out how much Marco should deposit today, we use the formula for the present value of a single future amount: $PV = \frac{FV}{(1 + r)^n}$, where PV is the present value (amount to deposit today), FV is the future value ($175,000), r is the annual interest rate (12% or 0.12), and n is the number of years (6). Plugging in the values, we get $PV = \frac{175,000}{(1 + 0.12)^6} \approx $88,660$.

Marco Needs $175,000 Six Years from Today