A local furniture store is advertising a deal in which you buy a $3,000 dining r
ID: 2503405 • Letter: A
Question
A local furniture store is advertising a deal in which you buy a $3,000 dining room set and do not need to pay for two years (no interest cost is incurred).
How much money would you have to deposit now in a savings account earning 5 percent APR, compounded monthly, to pay the $3,000 bill in two years?
How much would you have to deposit in the savings account each month to be able to pay the bill?
A local furniture store is advertising a deal in which you buy a $3,000 dining room set and do not need to pay for two years (no interest cost is incurred).
Explanation / Answer
How much money would you have to deposit now in a savings account earning 5 percent APR, compounded monthly, to pay the $3,000 bill in two years?
FV= PV*(1+r)^n
3000= PV*(1+5%/12)^(12*2)
PV= $2715.08
money would you have to deposit now in a savings account = $2715.08
How much would you have to deposit in the savings account each month to be able to pay the bill?
Let monthly deposit be x
Future value of depoits = $3000
x*(1+5%/12)^23 + x*(1+5%/12)^22+ x*(1+5%/12)^21 ......x*(1+5%/12)^0 = 3000
x= 119.114
monthly deposit = $119.114
How much money would you have to deposit now in a savings account earning 5 percent APR, compounded monthly, to pay the $3,000 bill in two years?
FV= PV*(1+r)^n
3000= PV*(1+5%/12)^(12*2)
PV= $2715.08
money would you have to deposit now in a savings account = $2715.08
How much would you have to deposit in the savings account each month to be able to pay the bill?
Let monthly deposit be x
Future value of depoits = $3000
x*(1+5%/12)^23 + x*(1+5%/12)^22+ x*(1+5%/12)^21 ......x*(1+5%/12)^0 = 3000
x= 119.114
monthly deposit = $119.114
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