Damion would like to take her family to Disney World in 3 years. He decides to purchase a vacation package that requires him to make 3 annual payments of $1,500 at the end of each year for the next 3 years. If he can earn 9% annually, how much should he set aside today so that the 3 annual payments can be made?
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Assuming we are talking about compound interest your answer is
1500/1.09 +1500/(1.09)^2 +1500/(1.09)^3 =$3,796.94
1500/1.09 +1500/(1.09)^2 +1500/(1.09)^3 =$3,796.94
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PV = pmt/(r/n)*(1-(1+r/n)^-(nt))
pmt = 1500
r = .09
n = 1 (annual compounding)
t = 3 (years)
Calculates to $3,796.94
pmt = 1500
r = .09
n = 1 (annual compounding)
t = 3 (years)
Calculates to $3,796.94