Your daughter is born today and you want her to be a millionaire by the time she is 40 years old.open an investment account that promises to pay 11.5% per year.How much money must you deposit today so your daughter will have $1,000,000 by her 35th birthday?

Question

Quizplus · Accepted Answer

To calculate the present value of future $1,000,000, we use the formula: PV = FV / (1 + r)^n. Here, FV = Future value = $1,000,000, r = interest rate per year = 11.5%, n = number of years till daughter's 35th birthday = 35 - 0 = 35. Substituting these values, we get PV = $1,000,000 / (1 + 0.115)^35 = $22,150. Therefore, you must deposit $22,150 today to ensure your daughter will have $1,000,000 by her 35th birthday.

Your Daughter Is Born Today and You Want Her to Be