You expect that you will need to replace your furnace in 4 yearsat a cost...

You expect that you will need to replace your furnace in 4 years at a cost of $15,067. How

much must you save today in an account that pays 3.18% APR (compounded monthly) to exactly pay the $15,067 in 4 years?

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Expert Solution

Present Value:

Present value is current value of Future cash flows discounted at specified discount Rate.

PV = FV / (1+r)^n
Where r is Int rate per period
n - No. of periods

Particulars	Amount
Future Value	$ 15,067.00
Int Rate	0.2650%
Periods	48

Present Value = Future Value / ( 1 + r )^n
= $ 15067 / ( 1 + 0.0027 ) ^ 48
= $ 15067 / ( 1.0027 ) ^ 48
= $ 15067 / 1.1355
= $ 13269.59

Amount Required today is $ 13269.59

jeff jeffy answered 1 year ago

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