$P is deposited today in a fund which earns j₁₂ = 6% for the 1^st year,j₄ = 6% for the 2^nd year and j₂ = 6% thereafter.At the end of 4 years,there is $12,000 in the fund.What is P?

Question

Quizplus · Accepted Answer

The correct answer is found by calculating the present value of $12,000 at the end of 4 years with the given interest rates for each year. The formula for the present value is $P = \frac{FV}{(1 + j)^n}$, where $FV$ is the future value, $j$ is the interest rate, and $n$ is the number of periods. Applying this formula for each year, we get $P = \frac{12000}{(1 + 0.06)^3}$ for the last three years at 6% interest, and then adjusting for the first year separately since the interest rate does not change. The calculation gives us approximately $9461.84.

$P Is Deposited Today in a Fund Which Earns J12

$P Is Deposited Today in a Fund Which Earns J₁₂