I want to buy a house in 5 years. I need to have a down payment of $50,000. How much do I need to have today in order to have the down payment, if I can earn 5%?
not sure how to go about this problem
This is what I get:
39,176.31 correct?
I just did the problem another way and got 39200.00 please help me!
Perhaps "Math" in the School Subject box will alert a math tutor to help you.
To calculate the amount you need to have today in order to have a down payment of $50,000 in 5 years, considering an annual interest rate of 5%, you can use the concept of compound interest.
Here's how you can go about solving this problem:
Step 1: Identify the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment/loan
P = the principal amount (initial investment/loan)
r = annual interest rate (in decimal form)
n = number of times that interest is compounded per year
t = number of years
Step 2: Fill in the known values:
A = $50,000 (future value)
r = 0.05 (annual interest rate)
n = 1 (assuming interest is compounded annually)
t = 5 (number of years)
Step 3: Rearrange the formula to solve for P:
P = A / (1 + r/n)^(nt)
Step 4: Substitute the values into the formula and calculate:
P = $50,000 / (1 + 0.05/1)^(1*5)
P = $50,000 / (1.05)^5
P ≈ $39,002.89
So, you would need to have approximately $39,002.89 today in order to have a down payment of $50,000 in 5 years, assuming you can earn a 5% annual interest rate.