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10 October, 21:19

If you want $1,000 three years from now and you earn 4 percent on your savings, how much do you need to deposit?

a. $1,000

b. $1,040

c. $1,030

d. $889

e. $885

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Answers (1)
  1. 10 October, 21:28
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    d. $889

    Explanation:

    The computation of the deposit amount is shown below:

    Principal = Amount : (1 + interest rate) ^number of years

    = $1,000 : (1 + 4%) ^3 years

    = $1,000 : 1.124864

    = $889

    Simply we divide the amount by the interest rate and the number of years so that the exact value can arrive
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