You want to have $25,000 for a down payment on a house 6 years from now. if you can earn 6.5 percent, compounded annually, on your savings, how much do you need to deposit today to reach your goal?

Question

Mathematics

Skyler Dillon

1 March, 23:41

You want to have $25,000 for a down payment on a house 6 years from now. if you can earn 6.5 percent, compounded annually, on your savings, how much do you need to deposit today to reach your goal?

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Answers (1)

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Leia · Answer 1

Use compound interest formula:

Future value, F

25000=P (1+i) ^n

where

P=present value to be found

i=annual interest rate = 0.065

n=number of years = 6

so

25000=P (1.065) ^6

=>

P = (25000/1.065^6) = $17133.353