discussion

For this discussion forum, use the Money Chimp Compound Interest Calculator (Links to an external site.) to calculate the amount of money you need to invest (i.e., present value) in the scenario below.

You are looking to invest for your child’s college education. You are getting a bit of a late start and estimate you will need about $80,000 to send your child to college in eight years. If you can earn 20 percent per year, how much do you need to invest now? Assuming your child will begin college at the age of 18, how much would you invest if you would had started the college fund when he or she was born? Does the answer surprise you? Why or why not?

Can you think of a personal or business investment decision where calculating present value would help you make a decision? Describe the situation, calculate present value, and summarize your decision.