You need to have $31,750 in 20 years. You can earn an annual interest rate of 6 percent for the first 6 years, 6.6 percent for the next 5 years, and 7.3 percent for the final 9 years. How much do you have to deposit today?Multiple Choice$9,899.80$6,882.49$8,624.32$7,743.93$8,601.25
Question
You need to have 9,899.808,624.328,601.25
Solution
To solve this problem, we need to calculate the present value of $31,750 in 20 years with the given interest rates.
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First, we calculate the present value for the last 9 years with an interest rate of 7.3%. The formula for present value is PV = FV / (1 + r)^n, where FV is the future value, r is the interest rate, and n is the number of years.
PV = 16,000.97
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Next, we calculate the present value for the previous 5 years with an interest rate of 6.6%.
PV = 11,282.68
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Finally, we calculate the present value for the first 6 years with an interest rate of 6%.
PV = 7,743.93
So, you would need to deposit 31,750 in 20 years with the given interest rates. Therefore, the correct answer is $7,743.93.
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