You have purchased a new mattress for $2,000, and the store has given you a "12 months, same as cash" deal. This means that you do not actually have to pay for the mattress for another year. One year from now, you will have to give the store the full price of $2,000. If the annual interest rate is 10%, how much money do you need today to ensure that you will have $2,000 one year from today?

Question

Quizplus · Accepted Answer

To ensure that you have $2,000 one year from today, you need to calculate the present value of $2,000. Using the formula PV=FV/(1+r)^n, where PV is the present value, FV is the future value, r is the interest rate, and n is the number of years, we get PV=2,000/(1+0.1)^1, which is equal to $1,818. Therefore, you need $1,818 today to ensure that you will have $2,000 one year from today.

You Have Purchased a New Mattress for $2,000, and the Store