Question

PRINTER VERSION «ВАСK NEXT Question 11 Ruth Lewis 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 $33,000 for the down payment. If Ruth can invest in a fund that pays 8.80 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.) Excel Template (Note: This template includes the problem statement as it appears in your textbook. The problem assigned to you here may have different values. When using this template, copy the problem statement from this screen for easy reference to the values you've been given here, and be sure to update any values that may have been pre-entered in the template based on the textbook version of the problem.) Amount to be invested today Open Show Work Click if you would like to Show Work for this question: SUBMIT ANSWE SAVE FOR LATER Question Attempts: 0 of 2 used

Answer 1

Given $33,000 Amount needed as downpayment Period 5 years Number of Quarter (Period X 4) 20 Annual Interest rate 8.80% Quarterly Interest rate (annual rate / 4) 2.20% Solution: We know that future value (FV), where quarterly compounding is (1+r) FV Investment х where, Quarterly interest rate Number of quarter n using above formula we get $33,000= Investment X 1.545318 $33,000 Investment 1.545318 $21,354.83 Investment Hence, amount to be invested today is $21354.83