Robert Kelly wants to start a business in 10 years. He hopes to have $100,000 at that time to invest in the business. To reach his goal, he plans to invest a certain amount today in a bank CD that will pay him 9.50 percent annually. How much will he have to invest today to achieve his target? (Round to the nearest dollar.)
A) $54,233
B) $63,837
C) $91,324
D) $40,351

Question

Quizplus · Accepted Answer

To find out how much Robert Kelly needs to invest today to achieve his target of $100,000 in 10 years at an annual interest rate of 9.50%, we use the formula for the present value of a single sum, which is: Present Value = Future Value / (1 + r)^n, where r is the annual interest rate (as a decimal) and n is the number of years. Plugging in the values: Present Value = $100,000 / (1 + 0.095)^10 = $100,000 / (1.095)^10 ≈ $40,351 (rounded to the nearest dollar).

Robert Kelly Wants to Start a Business in 10 Years