Narrative 11-1
Solve the following problems using either Tables 11-1 or 11-2 from your text. When necessary, create new table factors. (Round new table factors to five decimal places, round dollars to the nearest cent and percents to the nearest hundredth of a percent)
-Refer to Narrative in your text 11-1. Sonji wants to have $14,000 in 13 years. Calculate how much he should invest now at 6% interest, compounded semiannually in order to reach this goal.
A) $6,491.66
B) $7,297.80
C) $9,205.88
D) $10,794.12

Question

Quizplus · Accepted Answer

To find the present value that needs to be invested, we use the formula for the present value of a single future amount: $PV = FV / (1 + r/n)^{nt}$, where PV is the present value, FV is the future value ($14,000), r is the annual interest rate (6% or 0.06), n is the number of compounding periods per year (2 for semiannual), and t is the time in years (13). Plugging in the values, we get $PV = 14000 / (1 + 0.06/2)^{2*13}$, which calculates to approximately $6,491.66.

Narrative 11-1 Solve the Following Problems Using Either Tables 11-1 or 11-2