A company needs to have $150,000 in 5 years,and will create a fund to insure that the $150,000 will be available.If it can earn a 6% return compounded annually,how much must the company invest in the fund today to equal the $150,000 at the end of 5 years? (PV of $1,FV of $1,PVA of $1,and FVA of $1) $\bold{\text{(Use appropriate factor(s) from the tables provided.) }}$

A) $141,000
B) $112,095
C) $100,000
D) $45,000
E) $105,000

Question

A company needs to have $150,000 in 5 years,and will create a fund to insure that the $150,000 will be available.If it can earn a 6% return compounded annually,how much must the company invest in the fund today to equal the $150,000 at the end of 5 years? (PV of $1,FV of $1,PVA of $1,and FVA of $1)

\bold{\text{(Use appropriate factor(s) from the tables provided.) }}

A) $141,000
B) $112,095
C) $100,000
D) $45,000
E) $105,000

Sonia Hernandez · Accepted Answer

Final Answer : B, Explanation :  We need to use the future value table since we are given the present value and asked to find the future value. From the table, the factor for 5 years at 6% is 1.3382. Therefore, the amount that needs to be invested today is:$150,000 ÷ 1.3382 = $112,095 (rounded to the nearest dollar)Therefore, the best choice is B.

Definitions

Learning Objectives

Learning Objectives

Related questions