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 CD 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 can use the formula:
Present Value = Future Value / (1 + r)^n
where r is the interest rate and n is the number of years.
In this case, the future value is $25,000, the interest rate is 7.5%, and the number of years is 6.
Therefore, Present Value = $25,000 / (1 + 0.075)^6
                      = $16,199 (rounded to the nearest dollar)
Thus, the best choice is C.

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