In: Finance
You would like to save $50,000 for a down payment on a home in five years. How much do you need to have saved today if your investments are expected to earn a return of 5% per year?
Using the present value formula the present value of down payment can be calculated | ||||||
Present value | Future value*(1/(1+r)^n) | |||||
Present value | 50000*(1/(1.05^5) | |||||
Present value | 50000*0.783526 | |||||
Present value | $39,176 | |||||
Thus, amount needed to save today is $39,176 | ||||||