You intend to buy your dream PC upon graduation in 2 years. It will have a cost

Question

You intend to buy your dream PC upon graduation in 2 years. It will have a cost of $2975. You just received a $3000 pre-graduation gift from your rich uncle that you intend to deposit in a bank account that pays a 6% APR. How much of your gift will you need to deposit in order to have enough money for the PC upon graduation of the bank pays interest quarterly?

when place all the numbers in my BAIIPlus i get 1866.55, is that correct? FV=2975 N=8 I/Y= 6 PV=?

show me the soultion with the formula plz

Explanation / Answer

In this problem, we need to compute the present value of cost of PC.

We have:

FV= 2975

N = 2 x 4 = 8

R= 6.50%/4 = 1.50%

We have following formula for PV:

PV= FV/ (1+R)^n

     = 2975 / (1+0.015)^8

     = 2975 /1.126493

     =2640.94

So 2640.94 is required to be deposited now.

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