The amount you must deposit now in your savings account paying 6% interest in order to accumulate $6000 for a down payment 5 years from now on a new car is
A) $1200.
B) $4484.
C) $4477.
D) $4200.

Question

Quizplus · Accepted Answer

To find the present value (the amount you must deposit now) to accumulate a future sum, you use the formula for the present value of a single sum: PV = FV / (1 + r)^n, where PV is the present value, FV is the future value ($6000), r is the interest rate per period (6% or 0.06), and n is the number of periods (5 years). Plugging in the values: PV = $6000 / (1 + 0.06)^5 ≈ $4484.

The Amount You Must Deposit Now in Your Savings Account