Anthony Driver wants to buy a new car in 4 years.He knows that he can earn 6% interest compounded semi-annually.How much must he deposit now in order to have $26,000 at the end of 4 years?
A)$21,390.20.
B)$20,524.66.
C)$38,413.96.
D)$31.603.26.

Question

Quizplus · Accepted Answer

We can use the formula for compound interest to solve for the present value:

PV = FV / (1 + r/n)^(n*t)
PV = 26000 / (1 + 0.06/2)^(2*4)
PV = $20,524.66 (rounded to the nearest cent)

Therefore, Anthony should deposit $20,524.66 now in order to have $26,000 at the end of 4 years. Choice B is the best choice.

Anthony Driver Wants to Buy a New Car in 4