Question

Newlyweds Adam and Eve plan to purchase a new SUV in three years. The current price of the model they have their eyes on is $26,400. The manufacturer projects that the price of its cars will rise at an annual rate of 2.7% over the next three years. The couple notices a 3-year CD advertised in a newspaper with compound interest rate of 7.2% compounded quarterly. How much should they invest in such a CD today so as to pay cash for their dream SUV in three years? Round you answer to the nearest $100.

Answer 1