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You want to create a college fund for a child who is now 4 years old. The fund should grow to $55,000 in 14 years. If an investment available to you will yield 8 percent per year, how much must you invest in a lump sum now to realize the $55,000 when needed? Round your answer to nearest dollar.

You want to create a college fund for a child who is now 4 years old. The fund should grow to $55,000 in 14 years. If an investment available to you will yield 8 percent per year, how much must you invest in a lump sum now to realize the $55,000 when needed? Round your answer to nearest dollar.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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You want to create a college fund for a child who is now 4 years old. The fund should grow to $55,000 in 14 years. If an investment available to you will yield 8 percent per year, how much must you invest in a lump sum now to realize the $55,000 when needed? Round your answer to nearest dollar.

Appendix A-2 1% 2% 3% 1 0.9901 0.9804 0.9709 2 0.9803 0.9612 3 0.9706 0.9423 4 0.9610 0.9238 20% 0.8621 0.9009 0.8116 0.9426 0.9151 0.8885 0.8548 0.8850 0.7831 0.6931 5 0.9515 0.9057 0.8626 0.82 19 0.7835 6 0.1615 0.1346 11 0.1122 12 0.0935 13 0.0779 0.0736 0.0649 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 0.9615 0.9524 0.9434 0.9346 0.9259 0.9174 0.9091 0.89 29 0.8772 0.8696 0.8547 0.8475 0.8403 0.8333 0.9246 0.9070 0.8900 0.8734 0.8573 0.8417 0.8264 0.7972 0.7695 0.7561 0.7432 0.7305 0.7182 0.7062 0.6944 0.8890 0.8638 0.8396 0.8163 0.7938 0.7722 0.7513 0.7312 0.71 18 0.6750 0.6575 0.6407 0.6244 0.6086 0.5934 0.5787 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830 0.6587 0.63 55 0.6133 0.5921 0.5718 0.5523 0.5337 0.5158 0.4987 0.4823 0.7473 0.7130 0.6806 0.6499 0.6209 0.5935 0.5674 0.5428 0.5194 0.4972 0.4761 0.4561 0.4371 0.4190 0.4019 0.9420 0.8880 0.8375 0.7903 0.7462 0.7050 0.6663 0.6302 0.5963 0.5645 0.5346 0.5066 0.4803 0.4556 0.4323 0.4104 0.3898 0.3704 0.3521 0.3349 7 0.9327 0.8706 0.8131 0.7599 0.7107 0.6651 0.6227 0.5835 0.5470 0.5132 0.4817 0.4523 0.4251 0.3996 0.3759 0.3538 0.3332 0.3139 0.2959 0.2791 8 0.9235 0.8535 0.7894 0.7307 0.6768 0.6274 0.5820 0.5403 0.5019 0.4665 0.4339 0.4039 0.3762 0.3506 0.3269 0.3050 0.2848 0.2660 0.2487 0.2326 9 0.9143 0.8368 0.7664 0.7026 0.6446 0.5919 0.5439 0.5002 0.4604 0.4241 0.3909 0.3606 0.3329 0.3075 0.2843 0.2630 0.2434 0.2255 0.2090 0.1938 10 0.9053 0.8203 0.7441 0.6756 0.6139 0.5584 0.5083 0.4632 0.4224 0.3855 0.3522 0.3220 0.2946 0.2697 0.2472 0.2267 0.2080 0.1911 0.1756 0.8963 0.8043 0.7224 0.6496 0.5847 0.5268 0.4751 0.4289 0.3875 0.3505 0.3173 0.2875 0.2607 0.2366 0.2149 0.1954 0.1778 0.1619 0.1476 0.8874 0.7885 0.7014 0.6246 0.5568 0.4970 0.4440 0.3971 0.3555 0.3186 0.2858 0.2567 0.2307 0.2076 0.1869 0.1685 0.1520 0.1372 0.1240 0.8787 0.7730 0.6810 0.6006 0.5303 0.4688 0.4150 0.3677 0.3262 0.2897 0.2575 0.2292 0.2042 0.1821 0.1625 0.1452 0.1299 0.1163 0.1042 14 0.8700 0.7579 0.6611 0.5775 0.5051 0.4423 0.3878 0.3405 0.2992 0.2633 0.2320 0.2046 0.1807 0.1597 0.1413 0.1252 0.1110 0.0985 0.0876 15 0.8613 0.7430 0.6419 0.5553 0.48 10 0.4173 0.3624 0.3152 0.2745 0.2394 0.2090 0.1827 0.1599 0.1401 0.1229 0.1079 0.0949 0.0835 0.8528 0.7284 0.3387 0.2919 0.2519 0.2176 0.1883 0.1631 0.1415 0.1229 0.1069 0.0930 0.0811 0.0708 0.8444 0.7142 0.6050 0.5134 0.2703 0.2311 0.1978 0.1696 0.1456 0.1252 0.1078 0.09 29 0.0802 0.0693 0.0600 0.05.20 18 0.8360 0.7002 0.5874 0.4936 0.2120 0.1799 0.1528 0.1300 0.1108 0.0946 0.0808 0.0691 0.0592 0.0508 0.0437 19 0.8277 0.6864 0.5703 0.4746 0.1945 0.1635 0.1377 0.1161 0.0981 0.0829 0.0703 0.0596 0.0506 0.0431 0.0367 20 0.8195 0.6730 0.5537 0.4564 0.3769 0.3118 0.1486 0.1240 0.1037 0.0868 0.0728 0.0611 0.05 14 0.0433 0.0365 0.0308 21 08114 0.6598 0.5375 0.4388 0.3589 0.2942 0.1637 0.1351 0.1117 0.0926 0.0768 0.0638 0.0531 0.0443 0.0370 0.0309 0.0259 22 0.8034 0.6468 0.5219 0.4220 0.3418 0.2775 0.1839 0.1502 0.1228 0.1007 0.0826 0.0680 0.0560 0.0462 0.0382 0.03 16 0.0262 0.0218 23 0.7954 0.6342 0.5067 0.4057 0.3256 0.2618 0.2109 0.1703 0.1378 0.1117 0.0907 0.0738 0.0601 0.0491 0.0402 0.03 29 0.0270 0.0222 0.0183 24 0.7876 0.6217 0.4919 0.3901 0.3101 0.2470 0.1971 0.1577 0.1264 0.1015 0.0817 0.0659 0.0532 0.0431 0.0349 0.0284 0.0231 0.0188 0.0154 25 0.7798 0.6095 0.4776 0.3751 0.2953 0.2330 0.1842 0.1460 0.1160 0.0923 0.0736 0.0588 0.0471 0.0378 0.0304 0.0245 0.0197 0.0160 0.0129 0.5976 0.4637 0.3607 0.2812 0.2198 0.1722 0.1352 0.1064 0.0839 0.0663 0.0525 0.0417 0.0331 0.0264 0.0211 0.0169 0.0135 0.0109 27 0.7644 0.5859 0.4502 0.3468 0.2678 0.2074 0.1609 0.1252 0.0976 0.0763 0.0597 0.0469 0.0369 0.0291 0.0230 0.0182 0.0144 0.0115 0.0091 28 0.7568 0.5744 0.4371 0.3335 0.2551 0.1956 0.1504 0.0895 0.0693 0.0538 0.0419 0.03 26 0.0255 0.0200 0.0157 0.0123 0.0097 0.0077 29 0.7493 0.1073 0.0822 0.0630 0.0485 0.0374 0.0289 0.0224 0.0174 0.0135 0.0105 0.0082 0.0064 30 0.7419 0.1314 0.0994 0.0754 0.0573 0.0437 0.0334 0.0256 0.0196 0.0151 0.0116 0.0090 0.0070 0.0054 0.0668 0.0460 0.0318 0.0221 0.0154 0.0107 0.0075 0.0053 0.0037 0.0026 0.0019 0.0013 0.0010 0.0339 0.0213 0.0134 0.0085 0.0054 0.0035 0.0022 0.0014 0.0009 0.0006 0.0004 0.0003 0.0002 0.3936 0.0618 16 0.0541 17 0.6232 0.5339 0.4581 0.4363 0.4155 0.3714 0.3166 0.0451 0.3503 0.2959 0.2502 0.3957 0.3305 0.2765 0.2317 0.0376 0.0313 0.0261 0.2584 0.2145 0.1784 0.2415 0.1987 0.2257 0.0217 0.0181 0.0151 0.0126 0.0105 0.0087 26 0.7720 0.0073 0.1159 0.1406 0.5631 0.4243 0.3207 0.2429 0.1846 0.5521 0.4120 0.3083 0.2314 0.1741 0.4529 0.3066 0.2083 0.1420 0.0972 0.3715 0.1407 0.0061 0.0051 0.0042 0.0007 0.0001 0.67 17 40 50 0.6080 0.2281 0.0872 0.0543 Present Value of a Single Amount ($1) (Used to Compute the Discounted Present Value of Some Known Future Single Lump Sum) n
Transcribed Image Text:Appendix A-2 1% 2% 3% 1 0.9901 0.9804 0.9709 2 0.9803 0.9612 3 0.9706 0.9423 4 0.9610 0.9238 20% 0.8621 0.9009 0.8116 0.9426 0.9151 0.8885 0.8548 0.8850 0.7831 0.6931 5 0.9515 0.9057 0.8626 0.82 19 0.7835 6 0.1615 0.1346 11 0.1122 12 0.0935 13 0.0779 0.0736 0.0649 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 0.9615 0.9524 0.9434 0.9346 0.9259 0.9174 0.9091 0.89 29 0.8772 0.8696 0.8547 0.8475 0.8403 0.8333 0.9246 0.9070 0.8900 0.8734 0.8573 0.8417 0.8264 0.7972 0.7695 0.7561 0.7432 0.7305 0.7182 0.7062 0.6944 0.8890 0.8638 0.8396 0.8163 0.7938 0.7722 0.7513 0.7312 0.71 18 0.6750 0.6575 0.6407 0.6244 0.6086 0.5934 0.5787 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830 0.6587 0.63 55 0.6133 0.5921 0.5718 0.5523 0.5337 0.5158 0.4987 0.4823 0.7473 0.7130 0.6806 0.6499 0.6209 0.5935 0.5674 0.5428 0.5194 0.4972 0.4761 0.4561 0.4371 0.4190 0.4019 0.9420 0.8880 0.8375 0.7903 0.7462 0.7050 0.6663 0.6302 0.5963 0.5645 0.5346 0.5066 0.4803 0.4556 0.4323 0.4104 0.3898 0.3704 0.3521 0.3349 7 0.9327 0.8706 0.8131 0.7599 0.7107 0.6651 0.6227 0.5835 0.5470 0.5132 0.4817 0.4523 0.4251 0.3996 0.3759 0.3538 0.3332 0.3139 0.2959 0.2791 8 0.9235 0.8535 0.7894 0.7307 0.6768 0.6274 0.5820 0.5403 0.5019 0.4665 0.4339 0.4039 0.3762 0.3506 0.3269 0.3050 0.2848 0.2660 0.2487 0.2326 9 0.9143 0.8368 0.7664 0.7026 0.6446 0.5919 0.5439 0.5002 0.4604 0.4241 0.3909 0.3606 0.3329 0.3075 0.2843 0.2630 0.2434 0.2255 0.2090 0.1938 10 0.9053 0.8203 0.7441 0.6756 0.6139 0.5584 0.5083 0.4632 0.4224 0.3855 0.3522 0.3220 0.2946 0.2697 0.2472 0.2267 0.2080 0.1911 0.1756 0.8963 0.8043 0.7224 0.6496 0.5847 0.5268 0.4751 0.4289 0.3875 0.3505 0.3173 0.2875 0.2607 0.2366 0.2149 0.1954 0.1778 0.1619 0.1476 0.8874 0.7885 0.7014 0.6246 0.5568 0.4970 0.4440 0.3971 0.3555 0.3186 0.2858 0.2567 0.2307 0.2076 0.1869 0.1685 0.1520 0.1372 0.1240 0.8787 0.7730 0.6810 0.6006 0.5303 0.4688 0.4150 0.3677 0.3262 0.2897 0.2575 0.2292 0.2042 0.1821 0.1625 0.1452 0.1299 0.1163 0.1042 14 0.8700 0.7579 0.6611 0.5775 0.5051 0.4423 0.3878 0.3405 0.2992 0.2633 0.2320 0.2046 0.1807 0.1597 0.1413 0.1252 0.1110 0.0985 0.0876 15 0.8613 0.7430 0.6419 0.5553 0.48 10 0.4173 0.3624 0.3152 0.2745 0.2394 0.2090 0.1827 0.1599 0.1401 0.1229 0.1079 0.0949 0.0835 0.8528 0.7284 0.3387 0.2919 0.2519 0.2176 0.1883 0.1631 0.1415 0.1229 0.1069 0.0930 0.0811 0.0708 0.8444 0.7142 0.6050 0.5134 0.2703 0.2311 0.1978 0.1696 0.1456 0.1252 0.1078 0.09 29 0.0802 0.0693 0.0600 0.05.20 18 0.8360 0.7002 0.5874 0.4936 0.2120 0.1799 0.1528 0.1300 0.1108 0.0946 0.0808 0.0691 0.0592 0.0508 0.0437 19 0.8277 0.6864 0.5703 0.4746 0.1945 0.1635 0.1377 0.1161 0.0981 0.0829 0.0703 0.0596 0.0506 0.0431 0.0367 20 0.8195 0.6730 0.5537 0.4564 0.3769 0.3118 0.1486 0.1240 0.1037 0.0868 0.0728 0.0611 0.05 14 0.0433 0.0365 0.0308 21 08114 0.6598 0.5375 0.4388 0.3589 0.2942 0.1637 0.1351 0.1117 0.0926 0.0768 0.0638 0.0531 0.0443 0.0370 0.0309 0.0259 22 0.8034 0.6468 0.5219 0.4220 0.3418 0.2775 0.1839 0.1502 0.1228 0.1007 0.0826 0.0680 0.0560 0.0462 0.0382 0.03 16 0.0262 0.0218 23 0.7954 0.6342 0.5067 0.4057 0.3256 0.2618 0.2109 0.1703 0.1378 0.1117 0.0907 0.0738 0.0601 0.0491 0.0402 0.03 29 0.0270 0.0222 0.0183 24 0.7876 0.6217 0.4919 0.3901 0.3101 0.2470 0.1971 0.1577 0.1264 0.1015 0.0817 0.0659 0.0532 0.0431 0.0349 0.0284 0.0231 0.0188 0.0154 25 0.7798 0.6095 0.4776 0.3751 0.2953 0.2330 0.1842 0.1460 0.1160 0.0923 0.0736 0.0588 0.0471 0.0378 0.0304 0.0245 0.0197 0.0160 0.0129 0.5976 0.4637 0.3607 0.2812 0.2198 0.1722 0.1352 0.1064 0.0839 0.0663 0.0525 0.0417 0.0331 0.0264 0.0211 0.0169 0.0135 0.0109 27 0.7644 0.5859 0.4502 0.3468 0.2678 0.2074 0.1609 0.1252 0.0976 0.0763 0.0597 0.0469 0.0369 0.0291 0.0230 0.0182 0.0144 0.0115 0.0091 28 0.7568 0.5744 0.4371 0.3335 0.2551 0.1956 0.1504 0.0895 0.0693 0.0538 0.0419 0.03 26 0.0255 0.0200 0.0157 0.0123 0.0097 0.0077 29 0.7493 0.1073 0.0822 0.0630 0.0485 0.0374 0.0289 0.0224 0.0174 0.0135 0.0105 0.0082 0.0064 30 0.7419 0.1314 0.0994 0.0754 0.0573 0.0437 0.0334 0.0256 0.0196 0.0151 0.0116 0.0090 0.0070 0.0054 0.0668 0.0460 0.0318 0.0221 0.0154 0.0107 0.0075 0.0053 0.0037 0.0026 0.0019 0.0013 0.0010 0.0339 0.0213 0.0134 0.0085 0.0054 0.0035 0.0022 0.0014 0.0009 0.0006 0.0004 0.0003 0.0002 0.3936 0.0618 16 0.0541 17 0.6232 0.5339 0.4581 0.4363 0.4155 0.3714 0.3166 0.0451 0.3503 0.2959 0.2502 0.3957 0.3305 0.2765 0.2317 0.0376 0.0313 0.0261 0.2584 0.2145 0.1784 0.2415 0.1987 0.2257 0.0217 0.0181 0.0151 0.0126 0.0105 0.0087 26 0.7720 0.0073 0.1159 0.1406 0.5631 0.4243 0.3207 0.2429 0.1846 0.5521 0.4120 0.3083 0.2314 0.1741 0.4529 0.3066 0.2083 0.1420 0.0972 0.3715 0.1407 0.0061 0.0051 0.0042 0.0007 0.0001 0.67 17 40 50 0.6080 0.2281 0.0872 0.0543 Present Value of a Single Amount ($1) (Used to Compute the Discounted Present Value of Some Known Future Single Lump Sum) n
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