Your anticipated wedding is three years from today. You don't know who your spouse will be but you do know that you are saving $10,000 today and $17,000 one year from today for this purpose. You also plan to pay the final $12,000 of anticipated costs on your wedding day. At a discount rate of 5.5 percent, what is the current cost of your upcoming wedding?

Question

Quizplus · Accepted Answer

The current cost of the upcoming wedding can be calculated by discounting the future payments back to their present value using the given discount rate of 5.5 percent. The calculation involves the present value of a single sum formula for each payment:1. $10,000 is already in today's dollars, so it remains $10,000.2. $17,000 one year from today: PV = FV / (1 + r)^n = $17,000 / (1 + 0.055)^1 = $16,107.143. $12,000 three years from today: PV = $12,000 / (1 + 0.055)^3 = $10,225.97Adding these up gives the total current cost: $10,000 + $16,107.14 + $10,225.97 = $36,333.11

Your Anticipated Wedding Is Three Years from Today