Question

You need to have $34,000 in 11 years. You can earn an annual interest rate of 3 percent for the first 6 years, and 3.6 percent for the next 5 years. How much do you have to deposit today?

Answer 1

$23,859.25

Step-by-step explanation:

As we know that

Future value = Present value × (1 + interest rate)^number of years

where,

Future value = $34,000

Interest rate and the number of years are different to each other

So, the present value is

$34,000 = Present value × (1.03)^6 × (1.036)^5

$34,000 = Present value × 1.4250238247

So, the present value is $23,859.25

We simply applied the above formula so that the approximate today deposited value or present value could come