You plan to pay $38,000 cash for the new truck you want to buy 5 years from now. You are a very astute investor; all your money earns at 20% per year. If you have already saved $9500, the amount your rich aunt has to give you 2 years from now (as a graduation present) in order for you to have the total amount of $38,000 is closest to:

Question

(a) <$7500
(b) $7654
(c) $8,310
(d) $9,880

Answer 1

9,500(F/P,20%,5) + x(F/P,20%,3) = 38,000
9500(2.4883) + x(1.7280) = 38,000
x = $8311
Answer is (c)