Question

A local furniture store is advertising a deal in which you buy a $2,900 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 6 percent APR, compounded monthly, to pay the $2,900 bill in two years? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Find Present value

How much would you have to deposit in the savings account each month to be able to pay the bill? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Find Annuity Payment per month

Please answer both parts correctly. Thank you!

Answer 1

Calculating Present Value,

Present Value = 2,900/(1 + 0.06/12)²⁴

Present Value = $2,572.84

Calculating Monthly Deposit Required,

Using TVM Calculation,

PMT = [PV = 0, FV = 2,900, N = 24, I = 0.06/12]

PMT = $114.03