Asked by Bentou Sanoe on Jun 20, 2024
Verified
In January, Dana Blakely decided to donate $2,500 to the Riverfront Humane Society. For income tax purposes, she will not make the donation until next December. If Dana can earn 12% compounded monthly, how much must she invest in January to have $2,500 in 11 months? (Use Tables 16-1A&B or 16-2A&B or a calculator.)
Compounded Monthly
Refers to the process of calculating interest where the accumulated interest is added to the principal sum at the end of each month, leading to "interest on interest."
Present Value
The contemporary valuation of future monetary sums or cash flow streams, determined by an established rate of profit.
- Calculate the present valuation of prospective amounts to meet distinct financial aims.
- Apply financial calculators or tables to determine solutions for time value of money challenges.
- Comprehend the effects of varying compounding intervals on investment growth.
Verified Answer
PM
Perla MartosJun 26, 2024
Final Answer :
0.12 ¸ 12 = 0.01; 11 months;
$2,500 ´ 0.89632 = $2,240.80 Invest in January
$2,500 ´ 0.89632 = $2,240.80 Invest in January
Learning Objectives
- Calculate the present valuation of prospective amounts to meet distinct financial aims.
- Apply financial calculators or tables to determine solutions for time value of money challenges.
- Comprehend the effects of varying compounding intervals on investment growth.
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