You would like to save $50,000 for a down payment on a home in five years....

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?

$43,133
$37,500
$38,960
$50,000
$39,176

Solutions

Expert Solution

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

jeff jeffy answered 2 years ago

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