Question

Present value: Jack Robbins is saving for a new car. He needs to have $ 21,000 for the car in three years. How much will he have to invest today in an account paying 8 percent annually to achieve his target? (Round to nearest dollar.)

Answer 1

$16,670

Step-by-step explanation:

The computation of the present value is shown below:

As we know that

Future value = Present value × (1 + rate)^number of years

where,

Future value = $21,000

Interest Rate = 8%

Number of years = 3 years

So, the present value is

$21,000 = Present value × (1 + 0.08)^3

$21,000 = Present value × 1.259712

So, the present value is

= $16,670