How much money must be invested today to have $25 000 at the end of four years, if the rate of return is 20 per cent?

Question

Quizplus · Accepted Answer

To find the present value (the amount of money to be invested today), we use the formula for the present value of a single sum, which is $PV = \frac{FV}{(1 + r)^n}$, where PV is the present value, FV is the future value ($25,000), r is the annual interest rate (20% or 0.20), and n is the number of periods (4 years). Plugging in the values, we get $PV = \frac{25000}{(1 + 0.20)^4} = \frac{25000}{(1.20)^4} = \frac{25000}{2.0736} ≈ 12054.40$. Since this value is not among the given options, the correct answer is D, None of the given answers.

How Much Money Must Be Invested Today to Have $25