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The abc company wishes to retire a $7,000,000 bond 10 years from now. what single deposit should they make in the bank today in order to retire the bond if they can earn 8% annually on its investment?

Respuesta :

Yna9141
The future amount of a current investment which has compounding interest can be calculated through the equation,
 
                F = P x (1 + i)^n

where F is the future amount,  P is the present worth, i is the interest rate, and n is the number of years. Substituting the known values,

              $7,000,000 = P x (1 + 0.08)^10

The value of P from the equation is $3,242,354.42

ANSWER: $3,242,354.42. 

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