Suppose you are still committed to owning a $245,000 Ferrari (see Problem 9). If you believe your mutual fund can achieve an annual rate of return of 11.2 percent and you want to buy the car in 9 years (on the day you turn 30), how much must you invest today

By investing $94237.34 today at 11.2% interest per year for nine years, I will have $245000 in nine years' time

Explanation:

The formula required here present value. which gives today's value of $245000 in nine years at interest rate of 11.2%,

PV=FV / (1+r) ^n

FV=future value = $245000

r=rate=11.2%

n=number of years=9 years

PV=245000 / (1+0.112) ^9

PV=$94237.34