How much would you have to invest today to receive $15,000 in 8 years at 10 percent?

Question

This is a Present Value Sample Problem and I need further understanding of what equation I must use to solve this. Other than simply saying I need a certain amount. 10 point to the best Answer!

Answer 1

You didn't say if this was simple interest or compounded. I'm going to presume compounded.

For compounded interest, you'd use

PV x (1 + i) ^ y = FV

where
i = interest rate
y = # of years
PV = present value
FV = future value

==
For your problem, you could play with numbers to get the $15K, or you could solve for PV. If you solve for present value, you'll have this equation.

PV x (1 + i) ^ y = FV

PV = FV / (1 + i)^y

Since you were just looking for the formula, you're done. Here's a real life example in use.

How much do I today to (potentially) retire in 20 yrs with $1,000,000 @ 6%/yr.

PV = 1,000,000/(1+0.06)^20
= 1,000,000 / 3.207135
= 311,804

So to get your answer, just plug in your numbers and you're done.

Good luck!

Answer 2

let the amount invested be x
x(11/10)^8=15000
x=15000(10/11)^8

Answer 3

you divide your interest rate into 72 and this will tell you how many years it will take to double your principle . at 10% your money will will double in about 7.2 years. so in round numbers you will need to invest about $7500

Answer 4

18750 for further explanation write an e-mail