Question

How much must be deposited today into the following account in order to have $35,000 in 7 years for a down payment on a​ house? Assume no additional deposits are made.

Answer 1

Answer:

The amount that must be deposited is $ 19973.87.

Step-by-step explanation:

We have a relation between future value present value as:

                                       F= P $(1 +\frac{r}{n} )^{nt}$

F=future value

P=present value

r=rate (as a decimal)

n=number of compounding periods per year

t=number of years

Now,

               assume rate as 8%

                                       35000= P $(1+\frac{0.08}{12} )^{12*7}$

                                or,   35000= P × $1.0067^{84}$

                                      or, P = $\frac{35000}{1.7522}$

                                     or, P = $ 19973.87

So you must deposit $ 19973.87 today.