Discover the answers you need at Westonci.ca, a dynamic Q&A platform where knowledge is shared freely by a community of experts. Explore our Q&A platform to find in-depth answers from a wide range of experts in different fields. Get quick and reliable solutions to your questions from a community of experienced experts on our platform.
Sagot :
Answer:
The amount the client would need to invest now is $182,143.58.
Explanation:
This can be calculated using the following two steps:
Step 1: Calculate the present value (PV) of the amount invested 4 years from now
This can be calculated using the formula for calculating the present value of an ordinary annuity as follows:
PV4 = P * ((1 - (1 / (1 + r))^n) / r) …………………………………. (1)
Where;
PV4 = Present value of the amount invested 4 years from now = ?
P = Annual payment = $50,000
r = Interest rate = 10%, or 0.10
n = number of years the annual payment will be received = 5
Substitute the values into equation (1), we have:
PV4 = $50,000 * ((1 - (1 / (1 + 0.10))^5) / 0.10)
PV4 = $189,539.34
Step 2: Calculate the amount the client would need to invest now
This can be calculated using the present value formula as follows:
PV = PV4 / (1 + r)^n …………………………. (2)
Where:
PV = Present value or the amount the client would need to invest now = ?
PV4 = Present value of the amount invested 4 years from now = $189,539.34
r = Interest rate = 10%, or 0.10
n = number of years of PV4 from now = 4
Substituting the relevant values into equation one, we have:
PV = $189,539.34 / (1 + 0.01)^4
PV = $182,143.58
Therefore, the amount the client would need to invest now is $182,143.58.
We hope you found this helpful. Feel free to come back anytime for more accurate answers and updated information. Thanks for using our service. We're always here to provide accurate and up-to-date answers to all your queries. Westonci.ca is your trusted source for answers. Visit us again to find more information on diverse topics.
