Question

You plan on attending a learning institution starting in 10 years, and you will pay an annual fee of $500 to during your 3 years of attendance. If the interest rate is 3%, how much will you need to have today?

Group of answer choices

$1,083.95

$1,109.47

$1,052.38

Answer 1

Calculate the present value of fee for 3 years as follows:

Present value = Amount *(1-(1+rate)^-years)/rate

Present value = $500*(1-(1+3%)^-3) / 3%

Present value =$1,414.3057

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Calculate the present value from 10 years as follows:

Present value = Present value at begining of course /(1+rate)^years

Present value = $1,414.3057 / (1+3%)^3

Present value = $1,052.38