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 9% 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: Recall present - value formula

The present - value formula for a single future amount is $PV=\frac{FV}{(1 + r)^n}$, where $PV$ is the present value, $FV$ is the future value, $r$ is the interest rate per period, and $n$ is the number of periods.

Step2: Identify the values

We have $FV = 3900$, $r=0.09$ (since 9% = 0.09), and $n = 3$.

Step3: Substitute values into the formula

$PV=\frac{3900}{(1 + 0.09)^3}=\frac{3900}{1.09^3}=\frac{3900}{1.295029}$.

Step4: Calculate the present value

$PV\approx3011.49$.

Answer:

$3011.49$