How much money would have to be invested today, at 9% compounded monthly in order to have $40,000 in seven years?
A) $21,353.81
B) $23,726.43
C) $33,786.03
D) $34,928.08
E) $5,071.92

Question

Quizplus · Accepted Answer

To find the present value (the amount of money to be invested today) to achieve a future value of $40,000 in 7 years at a 9% annual interest rate compounded monthly, we use the formula for the present value of a single sum: $PV = \frac{FV}{(1 + r/n)^{nt}}$, where PV is the present value, FV is the future value ($40,000), r is the annual interest rate (0.09), n is the number of compounding periods per year (12), and t is the time in years (7). Plugging in the values, we get $PV = \frac{40,000}{(1 + 0.09/12)^{12*7}}$, which calculates to approximately $21,353.81.

How Much Money Would Have to Be Invested Today, at 9