You wish to have $20,000 in an account 8 years from now. How much moneymust be deposited in the account now in order to have this amount if theaccount pays 12% compounded annually?(a) $8,490(b) $8,871(c) $7,632(d)$8,078

You wish to have $20,000 in an account 8 years from now. How much moneymust be deposited in the account now in order to have this amount if theaccount pays 12% compounded annually?(a) $8,490(b) $8,871(c) $7,632(d)$8,078

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 25P

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

You wish to have $20,000 in an account 8 years from now. How much money
must be deposited in the account now in order to have this amount if the
account pays 12% compounded annually?
(a) $8,490
(b) $8,871
(c) $7,632
(d)$8,078

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