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 annually to reach her target? (Round to the nearest dollar.)

Question

Quizplus · Accepted Answer

We can solve this problem using the formula for the future value of an annuity:

FV = PMT x ((1 + r)^n - 1) / r

where FV is the future value, PMT is the annual deposit, r is the interest rate, and n is the number of years.

Plugging in the given values, we get:

12,000 = PMT x ((1 + 0.068)^4 - 1) / 0.068

Solving for PMT, we get:

PMT = 2,537.84

Rounding to the nearest dollar, the answer is $2,538, which is choice C.

Cassandra Dawson Wants to Save for a Trip to Australia