You would like to have $50,000 for a new car in six years. If you deposit money today in a bank CD that pays 4 percent per year, how much must your deposit be?

Question

Quizplus · Accepted Answer

Using the formula for compound interest, we have:

Future value = Present value x (1 + interest rate)^time

Plugging in the given information, we get:

$50,000 = Present value x (1 + 0.04)^6

Solving for Present value, we get:

Present value = $39,516 (rounded to the nearest dollar)

Therefore, the best choice is B.

You Would Like to Have $50,000 for a New Car