How much money must be invested today in order to have $25,000 at the end of four years if the rate of return is 12% compounded annually?
A)$15,900.
B)$17,100.
C)$19,900.
D)$22,300.
E)Some other amount.

Question

Quizplus · Accepted Answer

The future value of an investment is given by the formula:FV = PV * (1 + r)^nwhere:FV is the future valuePV is the present valuer is the annual rate of returnn is the number of yearsIn this case, we have:FV = $25,000r = 12% = 0.12n = 4Substituting these values into the formula, we get:$25,000 = PV * (1 + 0.12)^4$25,000 = PV * 1.5735PV = $25,000 / 1.5735PV = $15,900Therefore, the amount of money that must be invested today in order to have $25,000 at the end of four years is $15,900.

How Much Money Must Be Invested Today in Order to Have