Question

invested in a mutual fund and at the end of 20 years he has $14,300 in his account. If the mutual fund returned an average yield of 8%, how much did he originally invest

Answer 1

He originally invested $3,068.04

Explanation:

This question is basically asking for Present value (PV) of one-time cashflow.

Present value formula ; PV =
`(FV)/((1+r)^(t) )`

$14,300 received 20 years from today is a future value so that will be your FV.

FV= 14300

t = 20 years

rate ;r = 8% or 0.08 as a decimal

PV =
`(14,300)/((1.08)^(20) )`

PV=14,300 /4.66095714

PV= 3,068.03937

Therefore he originally invested $3,068.04