Michael Peterson is seeking to accumulate $25,000 in six years to invest in a real estate venture. He can earn 6.35 percent annual interest with monthly compounding in a private investment. How much will he have to invest today to reach his goal?

17624

He will have to invest $17,624 today to reach his goal

Explanation:

Accumulated value = Future Value = FV = $25,000

Rate of Interest = r = 6.35% = 0.0635

Number of Year = n = 6 years

Amount Invested today = PV = ?

FV = PV x (1+r) ^n

$25,000 = PV (1 + 0.0635) ^6

$25,000 = PV (1.0635) ^6

$25,000 = PV x 1.41852

PV = $25,000 / 1.41852

PV = $17,624.01

PV = $17,624