Question

You need $8,000 four years from now for a down payment on your future house. How much money must you deposit today if your credit union pays 5% interest compounded annually? Pick the closest answer.

O $6,269.59
O $6,578.95
O $6,394.12
O $6,189.83

Answer 1

To find out how much money you need to deposit today for a down payment on your future house, you can use the formula for compound interest.

Step-by-step explanation:

To find out how much money you need to deposit today, we can use the formula for compound interest:

P = A / (1 + r)^n

Where:
P = present value
A = future value ($8,000)
r = interest rate (5% = 0.05)
n = number of periods (4 years)

Plugging in these values, we get:
P = 8000 / (1 + 0.05)^4 = $6,577

Therefore, you need to deposit approximately $6,577 today.