document.write( "Question 65734: Future Value the concept called Present value You want to buy a new car in 5 years and estimate you need $20,000.00.If the bank pays you 6% interest rate how much do you need to put in the bank today? I need step by step instructions of how to get the answer. The book gives the answer but no steps on how to get there. Thank you and have a nice day. This question came from an accounting business class online called The Kaplan E Guide to Business. \n" ); document.write( "
Algebra.Com's Answer #46431 by venugopalramana(3286)\"\" \"About 
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Future Value the concept called Present value You want to buy a new car in 5 years and estimate you need $20,000.00.If the bank pays you 6% interest rate how much do you need to put in the bank today? I need step by step instructions of how to get the answer. The book gives the answer but no steps on how to get there. Thank you and have a nice day. This question came from an accounting business class online called The Kaplan E Guide to Business.
\n" ); document.write( "I AM NOT SURE WHETHER YOU ARE AT HOME WITH ALGEBRA.ANY WAY I AM NOT USING X SYMBOL AND TRYING TO SHOW YOU A STANDARD BASE METHOD
\n" ); document.write( "LET US ASSUME YOU PUT 100 $ TO DAY
\n" ); document.write( "THE RATE OF INTEREST = 6%
\n" ); document.write( "YOU HAVE NOT MENTIONED WHETHER THE INTEREST IS COMPOUNDED EVERY YEAR OR NOT THAT IS WHETHER IT IS COMPOUND OR SIMPLE INTEREST.LET ME SHOW YOU BOTH VARIANTS.\r
\n" ); document.write( "\n" ); document.write( "VARIANT 1...........SIMPLE INTEREST..
\n" ); document.write( "THAT IS INTEREST IS NOT ADDED TO THE PRINCIPAL AT THE END OF THE YEAR, BUT PAID ONLY AT MATURITY CALCULATED ON THE ORIGINAL PRINCIPAL ONLY.\r
\n" ); document.write( "\n" ); document.write( "P=100.....R=6%=6/100..............T=5 YEARS
\n" ); document.write( "I = PTR=100*5*6/100=30
\n" ); document.write( "AMOUNT = P+I =130
\n" ); document.write( "SO IF YOU PUT 100 YOU GET 130 AT THE OF 5 YEARS.
\n" ); document.write( "HENCE IF WE WANT 20000, WE SHOULD PUT 20000*100/130=15384.8\r
\n" ); document.write( "\n" ); document.write( "VARIANT 2..........COMPOUND INTEREST.
\n" ); document.write( "THAT IS INTEREST IS ADDED TO THE PRINCIPAL AT THE END OF EVERY YEAR.
\n" ); document.write( "I YEAR
\n" ); document.write( "P=100.....R=6%=6/100..........T=1 YEAR
\n" ); document.write( "I=100*1*6/100=6
\n" ); document.write( "AMOUNT AFTER 1 YEAR = A1=100+6=106
\n" ); document.write( "II YEAR
\n" ); document.write( "P=106
\n" ); document.write( "I=106*1*6/100=6.36
\n" ); document.write( "A2=106+6.36=112.36
\n" ); document.write( "SIMILARLY
\n" ); document.write( "III YEAR
\n" ); document.write( "P3=112.96.....I3=6.74......A3=119.10
\n" ); document.write( "IV YEAR
\n" ); document.write( "P4=119.1......I4=7.15..........A4=126.25
\n" ); document.write( "V YEAR
\n" ); document.write( "P5=126.25.....I5=7.57..........A5=133.82
\n" ); document.write( "HENCE WE GET 133.82 AFTER 5 YEARS,IF WE PUT 100 AT THE BEGINING
\n" ); document.write( "HENCE TO GET 20000, WE SHOULD PUT 20000*100/133.82=14945.44
\n" ); document.write( "-----------------------------------------------------------------------
\n" ); document.write( "If you want a formula then the formula is
\n" ); document.write( "A=P[1+R]^T.....where
\n" ); document.write( "P=principal...A=amount....R= rate of interest per rupee......T=time period in years
\n" ); document.write( "in our case
\n" ); document.write( "P=?...A=20000....R=6%=0.06.....T=5 years........hence
\n" ); document.write( "20000=P[(1+0.06)^5
\n" ); document.write( "P=20000/[1.06^5]=14945.44
\n" ); document.write( " \n" ); document.write( "
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