Mat 221 Week 4 Dis. 1

When I was stationed in South Dakota I owned a 1994 Audi A4. I enjoyed the vehicle so much that ever since then I have wanted to own a new Audi A4. The current price of a 2013 Audi A4 is $33,395. In twelve years I assume that in order to keep consumers returning to their product they will continue to keep the price about the same. My goal is to save up enough money in 12 years to pay with cash. Let assume that I have found an investment that that promises an average return of 10% per year.
The desired item is a new Audi A4
The cost in 12 years will be about $33,395
The average interest rate of the investment is 10%.
The Present Value Formula is P = A(1+r)-n where P is the present value that will amount to A dollars in n years at interest rate r compounded annually.
The numbers are plugged into the formula P = A(1+r)-n and the quantity raised to a power and has a negative exponent of –n. It will look like:
P = 33395(1 + .10)-12
Next I will add inside the parentheses.
P = 33395(1.10)-12
Now by using the rules of exponents the negative exponent will change position and convert to a positive by finding the reciprocal and I will calculate 1.1012.
P = 33395(1.10)12
P = 33395/(1.10)12
P = 33395/3.138428…
Finally I will show the value of P using the formula.
P = 10640.67
Looking at the results of the formula, if I invest let’s say $11000.00 today I will have the $33395 and some change in 12 years to purchase my