Question

Marissa knows that she needs $35,000 for a down payment on a house. She found an investment that earns 3.25% interest compounding monthly. She would like to purchase the home in 5 years. How much should she put in the account now to ensure she has her down payment?

Answer 1

Answer:

It needs to put 29,757.1 in the account

Explanation:

We need to calculate the present value of 35,000 in five years at 3.25% per year compounding monthly

$Nominal \div (1+ \frac{r}{n} )^{time\times n} = Present Value$

Nominal = 35,000

rate = 0.0325

compounding = 12

years = 5

$35,000 \div (1+ \frac{0.0325}{12} )^{5\times 12} = Present Value$

PV = 29,757.10