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5. You intend to buy a vacation home in eight years and plan to have saved...

5. You intend to buy a vacation home in eight years and plan to have saved $75,000 for a down payment. How much money would you have to place today into an invest that earns 9% per year to have enough for your desired down payment?

A) $37,640
B) $37,218
C) $35,335
D) $34,989

Solutions

Expert Solution

Annual rate of interest is 9% ; interest compounded Annually
Years FVF of $ 1 @ 9%
0                                     1.0000
1                                     0.9174
2                                     0.8417
3                                     0.7722
4                                     0.7084
5                                     0.6499
6                                     0.5963
7                                     0.5470
8                                     0.5019
Present Value   PVF @ 9% in Eighth Year Future Value
Present Value = $                           75,000.00 $                        0.5019 $                        37,640
Answer = Money desired for down Payment = OptionA =$ 37,640

jeff jeffy answered 1 year ago
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