Question

On January 1, Alan King decided to transfer an amount from his checking account into an investment account that later will provide $83,000 to send his son to college four years from now). The investment account will earn 9 percent, which will be added to the fund each year-end. (Future Value of $1. Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1 (Use appropriate factor(s) from the tables provided.) Required: 1. How much must Alan deposit on January 17 2. What is the interest for the four years? Complete this question by entering your answers in the tabs below. References Required 1 Required 2 How much must Alan depost on January 17 (Round "Present Value to nearest whole dollar amount.) Table or Calo ator Function Future Value Recured 2 >

Answer 1

Future value = $83,000

Time period (n) = 4 years

Interest rate (i) = 9%

Present value = ?

Present value = Future value x Present value factor (i%, n)

= 83,000 x Present value factor (9%, 4)

= 83,000 x 0.70843

= $58,800

1.

Alan must deposit $58,800 on January 1.

2.

Interest for four years = Future value - Present value

= 83,000 - 58,800

= $24,200

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