Jeremy denham plans to save $5,693 every year for the next eight years, starting today. at the end of eight years, jeremy will turn 30 years old and plans to use his savings toward the down payment on a house. if his investment in a mutual fund will earn him 11.7 percent annually, how much will he have saved in eight years when he buys his house?

Question

Cayden Hendrix

Business

29 August, 07:16

Jeremy denham plans to save $5,693 every year for the next eight years, starting today. at the end of eight years, jeremy will turn 30 years old and plans to use his savings toward the down payment on a house. if his investment in a mutual fund will earn him 11.7 percent annually, how much will he have saved in eight years when he buys his house?

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Alexia Carrillo · Answer 1

The savings are under a mutual fund which uses compounding interest to get the future amount.

Solve the problem using the compounding interest formula

future value = principal amount [1 + (interest / number of times compounded per year) ^years invested

where:

principal value = $5693

interest = 11.7%=0.117

number of times compounded = 1

years = 8

future value = $13796.43

The amount that Jeremy could use as downpayment for the house after 8 years is $13796.43