Three years from now, Ari will purchase a laptop computer that will cost $2250.Assume that Ari can earn 6.25% (compounded monthly)on her money.How much should she set aside today for the purchase? Round off to the nearest $1.
A)$1250
B)$900
C)$1866
D)$3775

Question

Quizplus · Accepted Answer

We need to use the formula for the future value of a present sum: FV = PV(1+r/n)^(nt), where FV is the future value, PV is the present value, r is the interest rate, n is the number of times compounded per year, and t is the number of years.

In this case, we have FV = $2250, r = 6.25%, n = 12 (since interest is compounded monthly), and t = 3. We need to solve for PV.

2250 = PV(1+0.0625/12)^(12*3)
2250 = PV(1.0052083333)^36
PV = 2250/1.0052083333^36
PV = $1865.88

So Ari should set aside $1866 today for the laptop purchase. The closest answer choice is C.

Three Years from Now, Ari Will Purchase a Laptop Computer