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Your sister just deposited $8,500 into an investment account. She believes that she will earn an annual return of 9.4 percent for the next 9 years. You believe that you will only be able to earn an annual return of 8.8 percent over the same period. How much more must you deposit today in order to have the same amount as your sister in 9 years

Respuesta :

Answer:

$431.30

Explanation:

The Present value of deposit will be $8,500 * 9.4% discount rate at year 9.

PV = $8,500 * 1.094 ^ 9

PV = 19,079.84

The future value of the deposit will be,

FV = PV / ( 1 + r ) ^ n

FV = 19,079.84 / 1.088 ^ 9

FV = $8,931.30

The more deposit needed will be $8,500 - $8,931 = 431.30.

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