Question

Ricky Bobby wants to buy a new automobile for $55,000 in 8 years. How much money must Ricky's original investment be if he makes a single deposit into an account with monthly compounding and an annual interest rate of 3.90% in order to reach his goal? Round your answer to the nearest cent.

Answer 1

Answer:

PV= $40,279.36

Step-by-step explanation:

Giving the following information:

Number of periods= 8*12= 96 months

Interest rate= 0.039/12= 0.00325

Future value (PV)= $55,000

To calculate the initial investment, we need to use the following formula:

PV= FV/(1+i)^n

PV= 55,000 / (1.00325^96)

PV= $40,279.36