Question

My husband wants to buy the Ford F-150 Lightning truck mid-series (XLT) which starts at $52,974 MSRP.The formula is PV=FV/(1+r)^nThe truck cost would be $52,974 with 15 years to have enough money saved to pay for it. The interestrate is 7%.PV=52,974/(1+0.07) 15What is the PV?

Answer 1

Consider the given formula,

`PV=(FV)/((1+r)^n)`

This formula gives the relationship among present value (PV) and future (FV) of an investment, in terms of the rate of interest (r), and the number of years (n).

According to the given information in the problem,

`\begin{gathered} FV=52,974 \\ r=7\text{ percent} \\ n=15\text{ years} \end{gathered}`

Substitute the values in the given formula and obtain the corresponding present value as follows,

`PV=(52,974)/((1+(7)/(100))^(15))`

Evaluate the expression,

`\begin{gathered} PV=(52,974)/((1+0.07)^(15)) \\ PV=(52,974)/((1.07)^(15)) \\ PV=(52,974)/(2.759) \\ PV\approx19200 \end{gathered}`

Thus, the corresponding present value is $19200 approximately.