You need to have $20,000 for a down payment on a house 6 in years. If you can earn an annual interest rate of 4.2 percent, how much will you

Question

You need to have $20,000 for a down payment on a house 6 in years. If you can earn an annual interest rate of 4.2 percent, how much will you have to deposit today?

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Bella 2 months 2021-10-13T08:35:36+00:00 1 Answer 0 views 0

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    2021-10-13T08:37:23+00:00

    Answer: you have to deposit $15625 today

    Step-by-step explanation:

    Assuming the interest is compounded annually. 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 = $20000

    r = 4.2% = 4.2/100 = 0.042

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

    t = 6 years

    Therefore,.

    20000 = P(1 + 0.042/1)^1 × 6

    20000 = P(1.042)^6

    20000 = 1.28P

    P = 20000/1.28

    P = $15625

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