Michael Peterson is seeking to accumulate $25,000 in six years to invest in a real estate venture. He can earn 6.35 percent annual interest with monthly compounding in a private investment. How much will he have to invest today to reach his goal? (Round to the nearest dollar.)

Question

Quizplus · Accepted Answer

To find the present value, use the formula for compound interest: $ PV = \frac{FV}{(1 + r/n)^{nt}} $, where FV is the future value ($25,000), r is the annual interest rate (0.0635), n is the number of compounding periods per year (12), and t is the number of years (6). Calculating this gives approximately $17,097.

Michael Peterson Is Seeking to Accumulate $25,000 in Six Years