How much must be deposited today into the following account in order to have $30,000 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 8 %

Answer: $17505 must be deposited today.

Step-by-step explanation:

We would apply the formula for determining compound interest which is expressed as

A = P (1+r/n) ^nt

Where

A = total amount in the account at the end of t years

r represents the interest rate.

n represents the periodic interval at which it was compounded.

P represents the principal or initial amount deposited.

From the information given,

A = 30000

r = 8% = 8/100 = 0.08

n = 1 because it was compounded once in a year.

t = year

Therefore,.

30000 = P (1 + 0.08/1) ^1 * 7

30000 = P (1.08) ^7

30000 = 1.7138P

P = 30000/1.7138

P = $17505