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How much would you have to invest today at 4.5ompounded annually to have $32,425 available for the purchase of a car at the end of five years from now?

Sagot :

You have to invest today $26,019.48 at 4.5ompounded annually to have $32,425 available for the purchase of a car at the end of five years from now.

It is calculated as follows:

The formula for calculating present value is:

PV = FV(1 + r)^-n

where:

FV = Future value  = 32425

P = Present value  

R = interest rate  = 4.5

N = number of years  = 5 years

$32,425(1.045)^-5 = $26,019.48

Present value or PV is the current value of a future sum of money or any stream of cash flows giving a specified rate of return.

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