Answer:
She mus put $107,274 in the account now, if the account pays a fixed interest rate of 8%, to ensure that she has $500,000 in 20 years.
Explanation:
Future Target amount = FV = $500,000
Interest rate = r = 8% = 0.08
Number of years = n = 20 Years
Use Present value formula to calculate the investment to be made now to make $500,000 after 20 years.
Present value = Future value / ( 1 + r )^n
PV = FV / ( 1 + r )^n
PV = $500,000 / ( 1 + 0.08 )^20
PV = $500,000 / 4.661
PV = $107,274.10
