If you can earn 7.5 percent, compounded annually, on your savings, how much do you need to deposit today to reach your goal?

You want to have $50,000 for a down payment on a house 5 years from now. If you can earn 7.5 percent, compounded annually, on your savings, how much do you need to deposit today to reach your goal?

Group of answer choices

$35,133.35
$34,827.93
$34,677.70
$33,989.16
$32,886.33

Expert Solution

FV = 50000, n = 5 years, r = 7.5%

We have to find what amount should be deposied today = PV

PV = FV/(1+r)^n

PV = 50000/(1+0.075)^5 = 50000/1.43562933 = 34827.93

Answer : 34827.93

jeff jeffy answered 2 years ago

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