Formula: PV = FV/(1+i)^n
Symbol: PV = Present Value
FV = Future Value
i = interest rate
n = time
^ = exponent
Given: FV = $22,000
i = 5/100 x 1/4 (since it is compounded quarterly)
i = 0.02
n = 10 yrs x 4 compounded quarterly
n = 40
Solution:
PV = 22,000/(1+0.02)^40
PV = 9,963.5891 or $9,963.58
Francis should invest $9,963.58 at 8%
interest, compounded quarterly in order to have $22,000 in 10 years time.
