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16 August, 11:04

You want to have $25,000 for a down payment on a house 6 years from now. if you can earn 6.5 percent, compounded annually, on your savings, how much do you need to deposit today to reach your goal?

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  1. 16 August, 11:12
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    Use compound interest formula:

    Future value, F

    25000=P (1+i) ^n

    where

    P=present value to be found

    i=annual interest rate = 0.065

    n=number of years = 6

    so

    25000=P (1.065) ^6

    =>

    P = (25000/1.065^6) = $17133.353
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