 What large purchases or expenditures do you foresee in your future?  How are you preparing to make these purchases a reality?

 We have been calculating how much interest a certain amount of money will make over a given time period at different interest rates & compounding rates.  This is considered the future value of an investment

 We want to know how much we need to invest today to reach a specific amount in a specific amount of time.  This is called the present value of an investment.

Finding Future Value Finding Present Value  Deposit $1,000 into an account that earns 5% simple interest for 5 years. How much is in the account at the end of those 5 years?  You want to buy a house in 10 years. You estimate that you will need $100,000 for a down payment. If you are going to put your money in an account earning 5% interest, how much should you deposit?

 Starting price of $20,000

 The Toyota Camry has a starting price of $20,000. You want to purchase a similar car after college graduation.  If you were going to save some money specifically for the car, what would the best type of account be?  How much do you need to save?

 What was our formula for compound interest? B = P (1 + ) r n nt (1 + ) r n nt (1 + ) r n nt

P = (1 + ) r n nt B

 Starting at $20,000  A 5-year CD has an interest rate of 4% compounded annually  How much do you need to deposit in the CD to pay for the car in full in 5 years? ??? r =.04t =5B =$20,000 n = 1 P =

(1 + ) r n nt B r =.04t =5B =$20,000 P = n =1 (1 + ).04 1 (1x 5) 20,000 P = = $16,438.54

 Cost of $20,000  By putting your money in a 5-year CD, you can purchase this car for a price of $16,  How much do you save?

 Looking ahead to your post-college life, you set a goal of having $100,000 in your savings account 10 years after you graduate. How much do you need to deposit in an account that earns 4.5% interest, compounded daily, to meet your goal?

B = $100,000 t = 14 years r = n = 365 (1 + ) r n nt B P = (1+ ) (365 x 14) 100,000 P = 100,000 P = $53, P =

 You figure that it would make sense to purchase a condo within 3 years of your college graduation. You want to have a minimum of $35,000 for a down payment. If you are going to put this money in a savings account that earns 5.4% interest, compounded monthly, how much money should you deposit?

B = $35,000 t = 7 years r = n = 12 (1 + ) r n nt B P = (1+ ) (12 x 7) 35,000 P = 100,000 P = $24, P =