What is the present value of an investment that will be worth $9000 at the end of five years? Assume an APR of 6% compounded monthly. (Round your answers to the nearest cent.)
what is
9000(1.005)^-60 or 9000/(1.005)^60 ?
To find the present value of an investment, we need to use the formula for the present value of a future amount.
The formula is: PV = FV / (1 + r)^n, where PV is the present value, FV is the future value, r is the interest rate per period, and n is the number of periods.
In this case, the future value (FV) is $9000, the interest rate (r) is 6% or 0.06 (since it is compounded monthly, we need to convert the annual rate to a monthly rate), and the number of periods (n) is 5 years or 60 months.
Substituting these values into the formula: PV = $9000 / (1 + 0.06/12)^60
Now, we can calculate the present value:
PV = $9000 / (1 + 0.005)^60
Simplifying the equation:
PV = $9000 / (1.005)^60
Using a calculator, we can raise 1.005 to the power of 60 and then divide $9000 by the result to find the present value.
PV = $9000 / (1.005^60)
The present value is approximately $7417.71.