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How much must be deposited today into the following account in order to have $30,000 in 7 years for a down payment on a​ house? Assume no additional deposits are made.

An account with annual compounding and an APR of 8​%

User Benske
by
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1 Answer

4 votes

Answer: $17505 must be deposited today.

Explanation:

We would apply the formula for determining compound interest which is expressed as

A = P(1+r/n)^nt

Where

A = total amount in the account at the end of t years

r represents the interest rate.

n represents the periodic interval at which it was compounded.

P represents the principal or initial amount deposited.

From the information given,

A = 30000

r = 8% = 8/100 = 0.08

n = 1 because it was compounded once in a year.

t = year

Therefore,.

30000 = P(1 + 0.08/1)^1 × 7

30000 = P(1.08)^7

30000 = 1.7138P

P = 30000/1.7138

P = $17505

User Sam Benson
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