You want to buy a house in 5 years that will cost $160,000. To buy this house, you will need to have saved 20% for a down payment. How much less do you have to deposit today to reach this goal if you can earn 3.5 percent rather than 2.5 percent on your savings? Today's deposit is the only deposit you will make to this savings account. (Assume annual compounding.)

You want to buy a house in 5 years that will cost $160,000. To buy this house, you will need to have saved 20% for a down payment. How much less do you have to deposit today to reach this goal if you can earn 3.5 percent rather than 2.5 percent on your savings? Today's deposit is the only deposit you will make to this savings account. (Assume annual compounding.)

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 34P

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Question

am. 234.

You want to buy a house in 5 years that will cost $160,000. To buy this
house, you will need to have saved 20% for a down payment. How
much less do you have to deposit today to reach this goal if you can earn
3.5 percent rather than 2.5 percent on your savings? Today's deposit is
the only deposit you will make to this savings account. (Assume annual
compounding.)

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