You want to have $10,000 saved ten years from now.How much less do you have to deposit today to reach this goal if you can earn 5% rather than 4% on your savings?

Question

Quizplus · Accepted Answer

The future value of $1 deposited today at 5% for 10 years is $1.62889. The future value of $1 deposited today at 4% for 10 years is $1.48024. The difference between these two values is $0.14865. Therefore, you would have to deposit $10,000/$0.14865 = $67,290.32 today to reach your goal if you can earn 5% on your savings. If you can only earn 4% on your savings, you would have to deposit $10,000/$0.148024 = $67,845.51 today. The difference between these two amounts is $67,845.51 - $67,290.32 = $555.19.

You Want to Have $10,000 Saved Ten Years from Now