How much money would you have to deposit today in order to h

How much money would you have to deposit today in order to have $2,000 in five years if the discount rate is 7 percent per year? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

Solution

let the money deposit today be x

then the money after 5 years at 7% = $2000

= x(1+0.07)⁵ = 2000

then x = 2000 / (1.07)⁵

therefore x = 2000*0.7129 = $1425.97

The amount of $1425.97 is deposit today to get $2000 after 5 years at 7% discount rate