Peter Is Saving Money for a Vacation He Wants to Take

question 153

Multiple Choice

Peter is saving money for a vacation he wants to take five years from now.If the trip will cost $1,000 and he puts his money into a savings account paying 4 percent interest,compounded annually,how much would Peter need to deposit today to reach his goal without making further deposits?

• A) $961.54.
• B) $923.75.
• C) $867.81.
• D) $821.93.

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Definitions:

Cashier's Check

A check issued by a bank, drawn on its own funds rather than that of a personal account, ensuring the availability of funds.

Drawer

The party that writes or creates a bill of exchange, such as a check, directing a drawee to pay a specified sum to a payee.

Drawee

The party, typically a bank, upon whom a check or draft is drawn and is expected to pay the stated amount.

Drawer

The party that writes and signs a negotiable instrument, such as a check, instructing a drawee (often a bank) to pay a specified sum to a payee.