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21 April, 04:04

How much money do you have to put into a bank account that pays 10% interest compounded annually to have $10,000 in ten years?

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  1. 21 April, 07:12
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    Future value (FV) = $10,000

    Interest rate (r) = 10% = 0.10

    Number of years (n) = 10 years

    PV = FV (1 + r) - n

    PV = $10,000 (1 + 0.10) - 10

    PV = $10,000 (1.10) - 10

    PV = $10,000 x 0.3855

    PV = $3,855

    Explanation:

    In this case, there is need to calculate the present value. The present value is obtained by discounting the future value at 10% interest rate per annum for 8 years.
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