Question

Karen White is saving to buy a house in five years. She plans to put 20 percent down at that time, and she believes that she will need $29,000 for the down payment. If Karen can invest in a fund that pays 9.40 percent annual interest, compounded quarterly, how much will she have to invest today to have enough money for the down payment

Answer 1

$ 7,196.59

Step-by-step explanation:

To determine the the amount that should be invested today, we will workout a sum that will be invested today at 9.40% that would amount to 29,000 five(5 ) years time.

FV = PV ×(1+r/)^n/m

r = 9.40/4= 2.35 per quarter

29,000= PV × (1.0235)^(5×12)

29,000 =PV × 4.029682413

= 29,000/4.029682413

PV = 7,196.59

The amount that should be invested today to have enough money

$ 7,196.59