How much must you deposit today in order to withdraw $1,500 in 1 year, $400 in 2 years and $1,500 in 4 years, assuming your money earns 6% per year, compounded annually?
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A. B. C. D. E.Explanation
Solve this question by working 3 compound interest problems. On the BAII Plus, press 1 N, 6 I/Y, 0 PMT, 1500 FV, CPT PV, which yields $1,415.09. Then press
STO 1. Then press 2 N, 400 FV, CPT PV, which yields $356.00. Then press + RCL 1 = STO 1. Then press 4 N, 1500 FV, CPT PV, which yields $1,188.14. Then press + RCL 1 = to see the answer. On the HP12C, press 1 n, 6 i, 0 PMT, 1500 FV, PV. Then press STO 1. Then press 2 N, 400 FV, PV. Then press RCL 1 +
STO 1. Then press 4 n, 1500 FV, PV. Then press RCL 1 + to see the answer. Note that the answer will be displayed as a negative number. Make sure the BAII
Plus has the P/Y value set to 1.