Steve Fisher is saving for a new car. He needs to have $ 21,000 for the car in three years. How much will he have to invest today in an account paying 8 percent annually to achieve his target? (Round to nearest dollar.)
A) $22,680
B) $26,454
C) $16,670
D) $19,444

Question

Quizplus · Accepted Answer

To find out how much Steve needs to invest today to reach his goal of $21,000 in three years at an 8% annual interest rate, we use the formula for the present value of a single sum: PV = FV / (1 + r)^n, where PV is the present value (amount to invest today), FV is the future value ($21,000), r is the annual interest rate (8% or 0.08), and n is the number of years (3). Plugging in the values, we get PV = $21,000 / (1 + 0.08)^3, which calculates to approximately $16,670 when rounded to the nearest dollar.

Steve Fisher Is Saving for a New Car