Answer to Question #240597 in Civil and Environmental Engineering for Alan Enrico V Tuib

Question

Gerard has purchased a new car. He wishes to set aside enough money in a bank account to pay the
maintenance for the first 5 years. It has been estimated that the maintenance cost of a car is as follows:
Year Maintenance Cost
1 $100
2 120
3 140
4 160
5 180
Assume the maintenance costs occur at the end of each year and that the bank pays 5% interest.
How much should Gerard deposit in the bank now?

Answer 1

This is the calculation of the present value (PV) by the discount rate of 5%.

Answer: The deposited amount should be $766.64.