How much must be deposited today in an account earning 6% annually to accumulate a 20% down payment to use in purchasing a car o

Question

aliya0001 [1]

3 years ago

10

How much must be deposited today in an account earning 6% annually to accumulate a 20% down payment to use in purchasing a car o

ne year from now, assuming that the car's current price is $20,000, and inflation will be 4%?

Business

1 answer:

goblinko [34] · Answer 1 · 2021-11-17T20:18:50+03:00

goblinko [34]3 years ago

8 0

Hi there
The price of the car after a year would be
20,000×(1+0.04)
=20,800 because of inflation

The amount of down payment is
20,800×0.2
=4,160

So you need to deposit
P=4,160÷(1+0.06)
p=3,924.5 round your answer to get
P=3925

Hope it helps