Answered

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You can earn 8 percent interest, compounded annually. how much must you deposit today to withdraw $10,000 in 6 years?
a. $5,402. 69
b. $6,301. 70
c. $6,756. 76
d. $8,432. 10
e. $9,259. 26

Sagot :

The answer is $6,301.70

Given in question

Future account balance = $10,000

N = 6

I = 8%

Estimate the required initial deposit to obtain the amount of $10,000 in 6 years:

Initial Deposit= Balance/ (1+n)n

Initial Deposit= $10,000/(1+8%)6

Initial Deposit= $6,301.70

Compound interest is interest calculated on a loan or deposit based on both the initial principal and the accumulated interest from previous periods. Compound interest, which is thought to have originated in 17th-century Italy, can be defined as "interest on interest." It will accelerate the growth of a sum faster than simple interest, which is calculated solely on the principal amount.

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