Brenda Young desires to have 10000 eight years from now for

Brenda Young desires to have $10,000 eight years from now for her daughter’s college fund. If she will earn 4 percent (compounded annually) on her money, what amount should she deposit now? Use the present value of a single amount calculation. (Round time value factor to 3 decimal places and final answer to the nearest whole dollar.)

Solution

The amount required on maturity = Deposit amount * FVIF (yield , N)

=> 10000 = Deposit amount * FVIF (4% , 8 yrs)

=> 10000 = Deposit amount * 1.3686

=>   Deposit amount = $10000 / 1.3686 = $7306.74 or $7307