How much money must be invested into an account paying 8 ann

How much money must be invested into an account paying 8% annually, compounded annually, to have $815,000 in 22 years when I retire? a) Calculate the PV (Present Value) using the “Present Value of $1.00” table in your textbook. Remember: To use Table 13-3, you need the Number of Periods and the Interest Rate per Period. b) Calculate the PV (Present Value) using the formula: PV = FV / (1 +R)N Reminder: Always show work. You can do this by stating the values that you are substituting into the formula. c) How much interest did you earn over the life of the investment? You can use either the result from Part 4a or Part 4b for your calculations, since they are slightly different. Show your work.

Solution

A-

present value = Future value/PVAF at 8% for 22 years

815000/5.4375

149912.6

b-

Present value =future value/(1+r)^n

815000/(1.08)^22

149911.5

c-

interest earned on investment

815000-149911.5

665088.5