Question

present value. cheryl wants to have $3,900 in spending money to take on a trip to disney world in three years. how much must she deposit now in a savings account that pays 6% per year to have the money she needs in three years? to have $3,900 in three years, cheryl would need to deposit $ (round to the nearest cent.) (use your financial calculator or you may use the financial tables in appendix c in computing your answer.)

Explanation:

Step1: Identify the present - value formula

The formula for present value $PV$ when compounded annually is $PV=\frac{FV}{(1 + r)^n}$, where $FV$ is the future value, $r$ is the annual interest rate, and $n$ is the number of years.

Step2: Define the values

Let $FV = 3900$, assume $r$ (interest rate) is not given in the problem - for simplicity, if we assume an annual interest rate $r=0.06$ (6%) and $n = 3$.

Step3: Calculate the present value

$PV=\frac{3900}{(1 + 0.06)^3}=\frac{3900}{1.06^3}=\frac{3900}{1.191016}\approx3274.51$

Answer:

$3274.51$