The formula to calculate the present value of a future amount with compound interest is:
PV = FV / (1 + r)^n
Where:
PV = Present Value
FV = Future Value
r = interest rate per period
n = number of periods
In this case:
FV = R 6 000
r = 13% / 12 (monthly interest rate) = 1.083%
n = 4 years * 12 months = 48 months
PV = 6,000 / (1 + 0.013083)^48
PV = 6,000 / (1.013083)^48
PV = 6,000 / 1.71367
PV ≈ R 3 507.11
Therefore, the trust committee should deposit approximately R 3 507.11 today into an account that pays 13% interest per annum, compounded monthly in order to cover the expected cost of the project in 4 years' time.
A trust committee estimates that it will need an amount of R 6 000 in four years’ time to cover the expected cost of a new project. How much should they deposit today into an account that pays 13% interest per annum, compounded monthly in order to cover the expected cost of the project in 4 years’ time?
R 17.14
R 1 550.00
R 3 577.11
R 7 612.83
1 answer