You need to have $35,000 on hand to buy a new Lexus five years from today.To achieve that goal,you want to know how much you must invest today in a certificate of deposit guaranteed to return you 9% per year.To help determine what today investment is sum must be,you will use:
A)present value factors
B)future value factors
C)present value factors of an annuity
D)future value factors of an annuity

Question

Quizplus · Accepted Answer

The present value factors are used to determine the present value of a future cash flow, which is exactly what is needed in this scenario. The future value factors would be used if the question was asking how much the investment would be worth after five years. The present value factors of an annuity would be used for a series of payments, whereas this scenario involves a one-time lump sum investment.

You Need to Have $35,000 on Hand to Buy a New