You and your brother are planning a large anniversary party 3 years from today f

Question

You and your brother are planning a large anniversary party 3 years from today for your grandparents' 50th wedding anniversary. You have estimated that you will need $2,500 for this party. You can earn 3.5 percent compounded annually on your savings. How much would you and your brother have to deposit today in one lump sum to pay for the entire party?

$2,199.74                             
           $2,254.86                             
           $2,308.16                             
           $2,334.90                             
           $2,368.81

Explanation / Answer

we have Future value = FV = 2500

n = 3 yrs

i = 3.5%

We also know that Present value PV = FV/(1+i)^n = 2500/(1+3.5%)^3 = $2,254.86

So deposit reqd is $2,254.86

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