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Present Value A couple wants to have $40,000 in 5 years
Chapter 2, Problem 20A(choose chapter or problem)
Problem 20A
Present Value A couple wants to have $40,000 in 5 years for a down payment on a new house.
a. How much should they deposit today, at 6.4% compounded quarterly, to have the required amount in 5 years?
b. How much interest will be earned?
c. If they can deposit only $20,000 now, how much more will they need to complete the $40,000 after 5 years?
d. Suppose they can deposit $20,000 now in an account that pays interest continuously. What interest rate would they need to accumulate the entire $40,000 in 5 years?
Questions & Answers
QUESTION:
Problem 20A
Present Value A couple wants to have $40,000 in 5 years for a down payment on a new house.
a. How much should they deposit today, at 6.4% compounded quarterly, to have the required amount in 5 years?
b. How much interest will be earned?
c. If they can deposit only $20,000 now, how much more will they need to complete the $40,000 after 5 years?
d. Suppose they can deposit $20,000 now in an account that pays interest continuously. What interest rate would they need to accumulate the entire $40,000 in 5 years?
ANSWER:
Solution
Step 1 of 8
In this problem, we have to find the amount must be deposited now at 6.4% compounded quarterly to have enough money for the settlement?