You would like to have $8 500 for future spending in three years from now. How much should you deposit in your bank account now if the account pays you 0.4% interest per month?
A)$2 071
B)$7 362
C)$8 102
D)$8 399
E)$8 429

Question

Quizplus · Accepted Answer

To find the present value, we use the formula for compound interest: $PV = \frac{FV}{(1 + r)^n}$, where $FV$ is the future value, $r$ is the monthly interest rate, and $n$ is the total number of periods. Here, $FV = 8500$, $r = 0.004$, and $n = 36$ (3 years * 12 months). Calculating gives $PV \approx 7362$.

You Would Like to Have $8 500 for Future Spending