Katie Hector wants to purchase a condo in Oxford, MS, in 20 years. The cost of the condo is expected to be $180,000. Assuming she can earn 6% annually, what should Katie deposit today?
A)$126,900
B)$56,124
C)$89,400
D)$180,000
E)None of these

Question

Quizplus · Accepted Answer

To find out how much Katie needs to deposit today to have $180,000 in 20 years at an annual interest rate of 6%, we use the formula for the present value of a single sum: PV = FV / (1 + r)^n, where PV is the present value (what Katie needs to deposit today), FV is the future value ($180,000), r is the annual interest rate (6% or 0.06), and n is the number of years (20). Plugging in the numbers: PV = $180,000 / (1 + 0.06)^20 = $180,000 / (3.207) ≈ $56,124.

Katie Hector Wants to Purchase a Condo in Oxford, MS