Ask Question
29 October, 17:07

Nancy Jackson 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 $37,000 for the down payment. If Nancy can invest in a fund that pays 7.40 percent annual interest, compounded quarterly, how much will she have to invest today to have enough money for the down payment

+3
Answers (1)
  1. 29 October, 17:10
    0
    Down payment = 37,000 given in the question

    Rate of return = 7.4%/4 = 1.85% quarterly return

    Total Quarterly = 5*4 = 20

    Amount Required = ?

    We will apply the Compound Formula = S=p (1+i) ^n

    S is the future payment that is 37000

    P is present payment required to be invested

    I is the interest rate that is being paid on investment 7.4% annually divide it by 4 to have quarterly return

    N is the number of quarters

    P=S / (1+i) ^n

    P=37,000 / (1+1.85%) ^20

    P=37,000/1.4428

    P=25,644

    Amount that is required to be invested today is $25,644
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Nancy Jackson 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 ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers