Question

A firm wants to set up a savings account at 8% interest in order to meet the expected expenditures of a forklift. Compute the amount that should be invested now to provide three payments with the first payment in the amount $6000 occurring three years hence, then $4000 five years hence and finally $5000 eight years hence.

Answer 1

Solution

Case-1(6000 for 3 years)

Principal amount = 25000 dollars

case-2(4000 for 5 years).

principal amount=10000 dollars

case-3(5000 for 8years)

principal amount=7812.5 dollars