You are currently entering university and you want to buy your uncle's Mercedes when you graduate. He has promised to sell it to you for $18,000. How much will you have to deposit now, in an account earning 8%, to have enough money buy the car in 4 years?
A) $3,060
B) $6,122
C) $4,500
D) $13,230

Question

Quizplus · Accepted Answer

To have enough money to buy the car in 4 years, you need to calculate the present value of $18,000 using the formula for present value: PV = FV / (1 + r)^n, where PV is the present value, FV is the future value ($18,000), r is the annual interest rate (8% or 0.08), and n is the number of years (4). Plugging in the numbers: PV = $18,000 / (1 + 0.08)^4 = $13,230.

You Are Currently Entering University and You Want to Buy