You will need to buy a replacement computer, costing $3 000, in five years time. If you have a bank account which earns 8% annual interest, how much must you put in the bank every year in order to have enough money for the replacement, assuming you make your first deposit in a year's time?
A)$511
B)$586
C)$666
D)$675
E)$712

Question

Quizplus · Accepted Answer

The correct answer is A.The future value of the replacement computer is $3,000. The interest rate is 8% per year. The number of years is 5. The present value of the replacement computer is $3,000 / (1 + 0.08)^5 = $2,154.43. The annual deposit is $2,154.43 / 5 = $510.89.

You Will Need to Buy a Replacement Computer, Costing $3