Question

Marissa knows that she needs $35,000 for a down payment on a house. She found an investment that earns 3.25% interest compounding monthly. She would like to purchase the home in 5 years. How much should she put in the account now to ensure she has her down payment?

Answer 1

It needs to put 29,757.1 in the account

Step-by-step explanation:

We need to calculate the present value of 35,000 in five years at 3.25% per year compounding monthly

`Nominal / (1+ (r)/(n) )^(time* n) = $Present Value`

Nominal = 35,000

rate = 0.0325

compounding = 12

years = 5

`35,000 / (1+ (0.0325)/(12) )^(5* 12) = $Present Value`

PV = 29,757.10