Question

Lisa Anderson 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 $41,000 for the down payment. If Lisa can invest in a fund that pays 10.00 percent annual interest, compounded quarterly, how much will she have to invest today to have enough money for the down payment? (If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round your final answer to the nearest penny.) Amount to be invested today?

Answer 1

Information provided:

Future value= $41,000

Time= 5 years*4= 20 qua ters

Interest rate= 10%/4= 2.50% per quarter

The question is solved by computing the present value.

Enter the below in a financial calculator to compute the present value:

FV= 41,000

N= 20

I/Y= 2.50

Press the CPT key and PV to compute the present value.

The value obtained is 25,021.1087.

Therefore, the amount to be invested today is $25,021.11.

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