Finance. A person wishes to have $ 18 comma 000 cash for a new car 3 years from now. How much should be placed in an account now, if the account pays 6.1 % annual interest rate, compounded weekly?

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Grover

Business

26 April, 05:28

Finance. A person wishes to have $ 18 comma 000 cash for a new car 3 years from now. How much should be placed in an account now, if the account pays 6.1 % annual interest rate, compounded weekly?

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Answers (1)

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Paloma Irwin · Answer 1

The amount that would be placed in an account now that would result in $18000 in three years is $14,991.43 at 6.1% annual interest when compounded weekly

Explanation:

The formula of present value can be used in determining the amount to be invested now to reach $18000 in 3 years

PV=FV * (1+r/t) ^-Nt

FV is the future amount of $18000

r is the rate on the investment at 6.1% per year

N is the number of years at 3

t is the number of period in a year when interest is compounded, that is 52 weeks

PV=18000 * (1+6.1%/52) ^-3*52

PV=18000 * (1+0.001173077) ^-156

PV=18000 * (1.001173077) ^-156

PV=$14,991.43