Question

Stephanie wants to save $1000 for a down payment on a car she wants to buy in 3 years. She opens a savings account that pays 5% interest compounded annually. About how much should Stephanie deposit now to have enough money for the down payment in 3 years?

Answer 1

Hi there
The formula is
A=p (1+r)^t
A future value 1000
P present value?
R interest rate 0.05
T time 3 years
We need to solve for p
P=A÷(1+r)^t
So
P=1,000÷(1+0.05)^(3)
P=863.84 round your answer to get
P=864

Hope it helps