Question

The Moller Skycar M400 is a flying car known as a personal air vehicle (PAV) that is expected to be FAA-certified by December 31, 2011. The cost is $985,000, and a $100,000 deposit will hold one of the first 100 “cars.” Assume a buyer pays the $885,000 balance 3 years after making the $100,000 deposit. At an interest rate of 10% per year, what is the effective total cost of the PAV in year 3?

Answer 1

i know the answer already is there anyone who can help explain why they solve it like that

Answer 2

they used (F/P) where f=p(1+.10)^3, only on 100,000 why not the rest 885,000?