If you purchase an automobile for $20,000 in 2004 and inflation is 4 percent,how much would a similar automobile sell for four years from then? To solve this problem you would use the formula for the
A)bank discount.
B)internal rate of return.
C)present value of a lump sum.
D)future value of a lump sum.

Question

Quizplus · Accepted Answer

The formula for finding the future value of a lump sum is used when we want to know the value of a present amount at a future point in time, taking into account the interest earned over time. Therefore, to find out how much a similar automobile would sell for four years from the date of purchase, we need to find the future value of $20,000 at an inflation rate of 4 percent.

If You Purchase an Automobile for $20,000 in 2004 and Inflation