Jiayi would like to save for a car that will cost her $20,000 in five years. If the current interest rate is 6% per month, how much will she need to set aside, assuming monthly compounding (assume Jiayi does not add any more money after today)?

Question

Quizplus · Accepted Answer

To find the present value needed to reach $20,000 in five years with monthly compounding at 6% per month, use the formula for present value: PV = FV / (1 + r)^n. Here, FV = $20,000, r = 0.06, and n = 60 (5 years * 12 months). Solving gives approximately $606.29.

Jiayi Would Like to Save for a Car That Will