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13 January, 06:44

You need to have $20,000 for a down payment on a house 6 in years. If you can earn an annual interest rate of 4.2 percent, how much will you have to deposit today?

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  1. 13 January, 10:35
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    Answer: you have to deposit $15625 today

    Step-by-step explanation:

    Assuming the interest is compounded annually. We would apply the formula for determining compound interest which is expressed as

    A = P (1+r/n) ^nt

    Where

    A = total amount in the account at the end of t years

    r represents the interest rate.

    n represents the periodic interval at which it was compounded.

    P represents the principal or initial amount deposited

    From the information given,

    A = $20000

    r = 4.2% = 4.2/100 = 0.042

    n = 1 because it was compounded once in a year.

    t = 6 years

    Therefore,.

    20000 = P (1 + 0.042/1) ^1 * 6

    20000 = P (1.042) ^6

    20000 = 1.28P

    P = 20000/1.28

    P = $15625
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