Question

Danielle eventually wants to buy a house that requires a $40,000 down payment. In the meantime, she is investing $20,000 in mutual funds that are expected to grow to $40,000 in value over 10 years. Assuming that Danielle’s investments perform as expected, will they give Danielle enough for the down payment? Explain the reasoning behind your answer.

a. Yes
b. No
c. It depends on the market
d. Insufficient information

Answer 1

Yes, assuming Danielle's investments double in value as expected over 10 years, they will provide her with the exact amount needed for a $40,000 down payment on a house.

Step-by-step explanation:

The question asks whether Danielle's investments will grow to meet her goal of a $40,000 down payment for a house after 10 years, starting with an investment of $20,000. The provided information suggests that these investments are expected to double in value over the 10-year period, reaching $40,000. Therefore, the answer is Yes, assuming the investments perform as expected and reach the projected value of $40,000, Danielle will have precisely enough for the down payment on the house.

The reasoning behind your answer is based on the simple mathematical doubling of the initial investment from $20,000 to $40,000, which matches the required amount for the down payment. No further information is necessary, as the question specifically assumes the expected growth is met, without consideration to market fluctuations or other financial variables that could impact the actual return on investment.