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yaroslaw [1]
3 years ago
12

If you need $35,000 for a down payment on a house in six years, how much money must you invest today at 7% interest compounded a

nnually to achieve your goal?
Business
1 answer:
Zepler [3.9K]3 years ago
7 0

<u>Calculation of present value of money:</u>

We are given that you need $35,000 for a down payment on a house in six years, we need to find the amount of money that you must invest today at 7% interest compounded annually to achieve your goal.


We can calculate the present value using the following formula:


Present value = Future value * Present value of $1


Hence future value is $35,000 and Present value of $1 (7%, 6 years) shall be 0.66634 (Please refer to the present value of $1 table)


Hence,

Present value = 35000*0.66634 = 23,321.98



Hence, you must invest <u>$23,321.98</u> today at 7% interest compounded annually to achieve your goal.




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