Mia Kaminsky wants to attend Riverside Community College. She will need to have $25,000 six years from today. Mia is wondering what she will have to put in the bank today so that she will have $25,000 six years from now. Her bank pays 5% compounded semiannually. Using the tables in the handbook, the amount Mia will have to deposit is:
A) $18,950
B) $33,226
C) $18,590
D) $33,622
E) None of these

Question

Quizplus · Accepted Answer

To find the present value, use the formula for compound interest: $PV = FV / (1 + r/n)^{nt}$. Here, $FV = 25000$, $r = 0.05$, $n = 2$, $t = 6$. Calculate $PV = 25000 / (1 + 0.05/2)^{2*6} = 18590$.

Mia Kaminsky Wants to Attend Riverside Community College