Conhugeco is eyeing a new Plotzer 3,000, which has a list price of $12,000,000. How much should they set aside today if they want to make their purchase one year from now and their interest-bearing checking account pays 3% annually?
A) about $11.6 million
B) about $11.2 million
C) about $12.3 million
D) about $12.8 million

Question

Quizplus · Accepted Answer

To find out how much Conhugeco should set aside today, we need to calculate the present value of $12,000,000 one year from now at an interest rate of 3%. The formula for present value is PV = FV / (1 + r)^n, where FV is the future value ($12,000,000), r is the annual interest rate (3% or 0.03), and n is the number of years (1). Plugging in the numbers, we get PV = $12,000,000 / (1 + 0.03)^1 = $12,000,000 / 1.03 ≈ $11,650,485.44, which is about $11.6 million.

Conhugeco Is Eyeing a New Plotzer 3,000, Which Has a List