You want to have $45,000 in cash to buy a car 4 years from today. you expect to earn 4.5 percent, compounded annually, on your savings. how much do you need to deposit today if this is the only money you save for this purpose?

Question

Mathematics

Evelyn Sexton

Today, 00:35

You want to have $45,000 in cash to buy a car 4 years from today. you expect to earn 4.5 percent, compounded annually, on your savings. how much do you need to deposit today if this is the only money you save for this purpose?

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Answers (1)

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Newt · Answer 1

The formula is

A=p (1+r) ^t

A future value 45000

P present value?

R interest rate 0.045

T time 4years

We need to solve for p

P=A: (1+r) ^t

P=45,000: (1+0.045) ^ (4)

P=37,735.26