You expect that you will need to replace your furnace in 5 years at a cost...

You expect that you will need to replace your furnace in 5 years at a cost of $15,729. How much must you save today in an account that pays 3.42% APR (compounded monthly) to exactly pay the $15,729 in 5 years?

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Expert Solution

We use the formula:
A=P(1+r/12)^12n
where
A=future value
P=present value
r=rate of interest
n=time period.

15729=P*(1+0.0342/12)^(12*5)

P=15729/(1+0.0342/12)^(12*5)

=15729*0.843026584

=$13259.97(Approx)

jeff jeffy answered 1 year ago

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