how much must be deposited today into the following account in order to have 60000 dollars in 7 years for a down payment on a house. assume no additional deposits are made. an account with annual compounding and an APR of 7%. how much should be deposited today

Solution

h o w m u c h m u s t b e d e p os i t e d t o d a y in t o t h e f o ll o w in g a cco u n t in or d er t o ha v e 60000 d o ll a rs in 7 ye a rs f or a d o w n p a y m e n t o n a h o u se . a ss u m e n o a dd i t i o na l d e p os i t s a re ma d e . an a cco u n t w i t h ann u a l co m p o u n d in g an d an A PR o f 7%. h o w m u c h s h o u l d b e d e p os i t e d t o d a y

Principal : 37364.98

Solution steps

Translate the problem into an equation:

60000 = P (1 + \frac{0.07}{1})^{1 \cdot 7}

Solve for

P, 60000 = P (1 + \frac{0.07}{1})^{1 \cdot 7} : P = 37364.98

Principal : 37364.98