Present value: Becky Sayers wants to buy a house in six years. She hopes to be able to put down $25,000 at that time. If the bank term deposit she wants to invest in will pay 7.5 percent annually, how much will she have to invest today? (Round to the nearest dollar.)

Question

Quizplus · Accepted Answer

To find the present value, we need to use the formula for the present value of a future sum:

PV = FV / (1 + r)n

where PV is the present value, FV is the future value, r is the annual interest rate, and n is the number of years.

In this case, we know that FV = $25,000, r = 7.5%, and n = 6.

Plugging in these values, we get:

PV = $25,000 / (1 + 0.075)6
PV = $16,198.92

Rounding to the nearest dollar, we get a present value of $16,199. Therefore, the best choice is C.

Present Value: Becky Sayers Wants to Buy a House in Six