You want to set aside some money today in order to present your son with a $3,000 trip upon his graduation from high school in seven years. If your opportunity cost of capital is 10% per
Year, how much do you need to set aside? Round your answer to the nearest dollar.
A)$471
B)$1,233
C)$1,539
D)$4,843

Question

Quizplus · Accepted Answer

Using the present value formula, we have:
PV = FV / (1 + r)^n
where PV is the present value, FV is the future value (which is $3,000), r is the opportunity cost of capital (which is 10%), and n is the number of years (which is 7).
Substituting the values, we get:
PV = 3,000 / (1 + 0.1)^7
PV = 1,538.62
Rounding to the nearest dollar gives us $1,539, which is answer choice C.

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