Question

In: Finance

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

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