Ten years ago, Hailey invested $1,000 and locked in a 9% annual rate for 30 years (end 20 years from now). Aidan can make a 20-year investment today and lock in an 8% rate. How much money should he invest now in order to have the same amount of money in 20 years as Hailey?

Question

Quizplus · Accepted Answer

To calculate the amount of money Hailey will have in 20 years, we need to find the future value of her investment after 20 years:

FV = PV x (1 + r)n
where PV is the present value (initial investment), r is the annual interest rate, and n is the number of years.

Using this formula, we get:

FV(Hailey) = $1,000 x (1 + 0.09)^20
FV(Hailey) = $5,586.70

Now we need to find how much money Aidan should invest today to have the same amount in 20 years. We can use the same formula, but we need to solve for the present value:

PV = FV / (1 + r)n

Plugging in the values, we get:

$5,586.70 / (1 + 0.08)^20
PV(Aidan) = $2,846.56

Therefore, Aidan should invest $2,846.56 today to have the same amount of money in 20 years as Hailey.

Ten Years Ago, Hailey Invested $1,000 and Locked in a 9