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29 December, 23:08

Finance. A person wishes to have $ 18 comma 000 cash for a new car 3 years from now. How much should be placed in an account now, if the account pays 6.1 % annual interest rate, compounded weekly?

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  1. 30 December, 01:34
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    The amount that would be placed in an account now that would result in $18000 in three years is $14,991.43 at 6.1% annual interest when compounded weekly

    Explanation:

    The formula of present value can be used in determining the amount to be invested now to reach $18000 in 3 years

    PV=FV * (1+r/t) ^-Nt

    FV is the future amount of $18000

    r is the rate on the investment at 6.1% per year

    N is the number of years at 3

    t is the number of period in a year when interest is compounded, that is 52 weeks

    PV=18000 * (1+6.1%/52) ^-3*52

    PV=18000 * (1+0.001173077) ^-156

    PV=18000 * (1.001173077) ^-156

    PV=$14,991.43
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