Week 4 Discussion 1 Ashford University
I have a sedan, and would like to get sport car. The Car I would like to buy will cost me roughly $32,000. I have selected to use a 6% investment rate to complete this assignment. After doing the reading, I learned that the purpose of this assignment is to figure out what your initial investment must be, if you want to reach a financial goal.
My desired item is a camaro (sport car).
The cost in 12 years will be roughly $32,000.
The average interest rate for the investment is 6%.
I will be using the Present Value Formula to figure out what my initial investment must be. The formula is P=A(1+r)^(-n)
P represents the present value, A represents the dollars, n represents the number of years and r represents the rate of investment. I will now start to plug my numbers into the Present Value Formula.
P=A(1+r)^(-n) The power has a negative exponent of –n. The rules of exponents explain that a negative exponent will become a positive exponent because it changes position and goes down to the denominator.
P=32,000(1+.06)^(-12) This is the Present Value Formula with my numbers plugged in.
P=32,000(1.06)^(-12) I added inside the parenthesis.
P=32,000/((1.06)^12 ) As I stated earlier, the negative exponent changes position and becomes the reciprocal of the base number.
P=32,000/(2.01219…) I have applied the exponent to the base number.
P=15,903.07 the division has been carried out and I have solved for P.
So, given the 12 years and the 6% interest rate, I will need an initial investment of $15,903.07 to have roughly $32,000 saved in 12
My desired item is a camaro (sport car).
The cost in 12 years will be roughly $32,000.
The average interest rate for the investment is 6%.
I will be using the Present Value Formula to figure out what my initial investment must be. The formula is P=A(1+r)^(-n)
P represents the present value, A represents the dollars, n represents the number of years and r represents the rate of investment. I will now start to plug my numbers into the Present Value Formula.
P=A(1+r)^(-n) The power has a negative exponent of –n. The rules of exponents explain that a negative exponent will become a positive exponent because it changes position and goes down to the denominator.
P=32,000(1+.06)^(-12) This is the Present Value Formula with my numbers plugged in.
P=32,000(1.06)^(-12) I added inside the parenthesis.
P=32,000/((1.06)^12 ) As I stated earlier, the negative exponent changes position and becomes the reciprocal of the base number.
P=32,000/(2.01219…) I have applied the exponent to the base number.
P=15,903.07 the division has been carried out and I have solved for P.
So, given the 12 years and the 6% interest rate, I will need an initial investment of $15,903.07 to have roughly $32,000 saved in 12