Items 65 through 68 apply to the appropriate use of interest tables. Given below are the future value factors for 1 at 8% for one to five periods. Each of the items 65 to 68 is based on 8% interest compounded annually.

-What amount should be deposited in a bank account today to grow to $15,000 three years from today?
A) $15,000 × 1.260
B) $15,000 × 1.260 × 3
C) $15,000 ÷ 1.260
D) $15,000 ÷ 1.080 × 3

Question

Items 65 through 68 apply to the appropriate use of interest tables. Given below are the future value factors for 1 at 8% for one to five periods. Each of the items 65 to 68 is based on 8% interest compounded annually.
 
-What amount should be deposited in a bank account today to grow to $15,000 three years from today?
A) $15,000 × 1.260 
B) $15,000 × 1.260 × 3 
C) $15,000 ÷ 1.260 
D) $15,000 ÷ 1.080 × 3

Quizplus · Accepted Answer

We need to find the present value of $15,000, so we use the future value factor for 1 at 8% for three periods, which is 1.260. Thus, the amount that should be deposited today is $15,000 ÷ 1.260 = $11,904.76. Option A is incorrect because it only gives us the future value, not the present value. Option B is incorrect because it multiplies the future value factor by the number of periods, which is not necessary. Option D is incorrect because it uses the wrong interest rate and does not consider the future value factor.

Items 65 Through 68 Apply to the Appropriate Use of Interest