13. Present value

You just found out that you had a very eccentric uncle who lived quietly in Staten Island. He left you $25,000. You just saw the movie The Bucket List and have decided that you want to put some money away so that in 12 years, you can start fulfilling items on that list.

With whatever money you have left, youll pay off some bills. You have found an investment instrument that will pay 7% interest annually.

Use the scenarios along with the following factor table data to answer each of the questions. Note that the complete Future Value and Future Value Annuity tables (as well as the Present Value and Present Value Annuity tables) are located in the appendix in your text.

Factor Tables

Table of Present Value Factors

Year	Interest Rate
	3%	5%	7%	8%	9%
6	.837	.746	.666	.630	.596
8	.789	.677	.582	.540	.502
10	.744	.614	.508	.463	.422
12	.701	.557	.444	.397	.356
15	.642	.481	.362	.315	.275
20	.554	.377	.258	.215	.178

Table of Present Value Annuity Factors

Year	Interest Rate
	3%	5%	7%	8%	9%
6	5.417	5.076	4.767	4.623	4.486
8	7.020	6.463	5.971	5.747	5.535
10	8.530	7.722	7.024	6.710	6.418
12	9.954	8.863	7.943	7.536	7.161
15	11.938	10.380	9.108	8.560	8.061
20	14.878	12.462	10.594	9.818	9.129

Present Value of a Single Amount

What is the amount you should invest today to have $28,750 in 12 years?

Present Value of an Annuity

Now the 12 years have passed, and you are ready to pull some money out of your fund. You talked to your investment advisor who says you can take this money and move it into a fund that will earn 8% interest annually. And you envision tackling most of your bucket list items over the next 15 years.

What is the annual amount you will have to spend for your bucket list activities?

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