Luis Rodriguez Wants to Buy a Car in 3 Years

question 19

Short Answer

Luis Rodriguez wants to buy a car in 3 years. He will need $3000 for a down payment. The annual interest rate is 9%. How much money must Luis invest today for the purchase?

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Definitions:

Compounded Annually

Describes interest on an investment or loan calculated once a year on both the initial principal and the accumulated interest from previous periods.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, reflecting the time value of money.

Cash Equivalent Price

The value of an asset that is readily convertible into a known amount of cash with negligible risk of changes in value.

Acquisition Date

The specific date on which an acquisition or takeover of one entity by another is officially completed.