Question

Today, your dream car costs $58,900. You feel that the price of the car will increase at an annual rate 1.9 percent. If you plan to wait 3 years to buy the car, how much will it cost at that time?

Answer 1

Here we will use the following formula:

FV = PV * (1 + r%)n

where, FV = Future value, PV = Present value = $58900, r = rate of interest = 1.9%, n= time period = 3

now, putting theses values in the above equation, we get,

FV = $58900 * (1 + 1.9%)3

FV = $58900 * (1 + 0.019)3

FV = $58900 * (1.019)3

FV = $58900 * 1.058089859

FV = $62321.49

So, after 3 years, the car will cost $62321.49