Question

Rosa Burnett needs $6,000 in 3 years to make the down payment on a new car. How much must she invest today if she receives 2.5% interest annually, compounded annually?

A Present Value of $1.00 ta Periods 10 Rate per period 0.5% 1% 1.5% 2% 2.5% 3% 4% 5% 6% 8% 10% 12% 0.99502 0.99010 0.98522 0.

Answer: She must invest $ . (Round to the nearest cent as needed.)

Answer 1

She must invest $
`N_0=(N_3)/((1+0.025)^3)= (6000)/(1.076)=5571.60`

Explanation:

Using the formula fot compund interest:

`N_n=N_0*(1+0.025)^n`

Replacing n=3,
`N_3=6000` and solving for
`N_(0)`: