You plan on purchasing a new car in 9 months. The cost of the car in...

You plan on purchasing a new car in 9 months. The cost of the car in 9 months will be $25,127. How much would you have to invest today to exactly pay for the new car if you investments earn 4.86% APR (compounded monthly)?

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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.[9 months=9/12 years]

25,127=P*(1+0.0486/12)^(12*9/12)

25,127=P*1.0370461

P=25,127/1.0370461

=25,127*0.964277287

$24229.4(Approx)

jeff jeffy answered 2 years ago

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