Question

You need to have $35,000 on hand to buy a new Lexus five years from today. To achieve that goal, you want to know how much you must invest today in a certificate of deposit guaranteed to return you 3% per year. To help determine how much to investment today, you will use:(A) present value factors (B) annuity value factors(C) present value factors of an annuity(D) future value factors of an annuity

Answer 1

Answer:

:(A) present value factors

Explanation:

Given that you  need to have $35,000 on hand to buy a new Lexus five years from today. To achieve that goal, you want to know how much you must invest today in a certificate of deposit guaranteed to return you 3% per year.

i.e. we have to calculate how much to invest when we want to have 35000 dollars on hand after 5 years from today.

Rate is given as 3% per year.

So we have to find the present value factor

The formula used is if P is to be invested

P(1.03)^t = 35000 $ assuming compound interest.

So P = 35000 (1.03)^(-t)

Thus we are calculating present value factor

Answer is

:(A) present value factors