Cassandra Dawson wants to save for a trip to Australia. She will need $12,000 at the end of four years. She can invest a certain amount at the beginning of each of the next four years in a bank account that will pay her 6.8 percent annually. How much will she have to invest each year to reach her target? (Round to the nearest dollar.)

Question

Quizplus · Accepted Answer

To find out how much Cassandra needs to invest each year, we can use the formula for the present value of an annuity:

PV = C * [(1 - (1 + r)^-n) / r]

where PV is the present value (or the amount Cassandra needs to invest in total), C is the amount she needs to invest each year, r is the interest rate, and n is the number of years.

Plugging in the given values, we get:

12000 = C * [(1 - (1 + 0.068)^-4) / 0.068]

Solving for C, we get:

C = 2538.44

Rounding this to the nearest dollar, we get:

C = $2,538

So Cassandra needs to invest $2,538 each year to reach her target of $12,000 in four years. Therefore, the best choice is C.

Cassandra Dawson Wants to Save for a Trip to Australia