Question

A person wishes to have $ 18,700 cash for a new car 3 years from now. How much should be placed in an account​ now, if the account pays 5.6 % annual interest​ rate, compounded​ weekly?

Answer 1

Information provided:

Future value= $18,700

Time= 3 years*52= 156 weeks

Interest rate= 5.6%/52= 0.1077% per week

The question is solved by computing the present value.

Enter the below in a financial calculator to compute the amount to be placed in an account now:

FV= 18,700

N= 156

I/Y= 0.1077

Press the CPT key and PV to compute the present value.

The value obtained is 15,809.55.

Therefore, $15,809.55 should be placed in an account now to have $18,700 in 3 years.

In case of any query, kindly comment on the solution.