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Homework answers / question archive / John plans to buy a vacation home in 11 years from now and wants have saved $43,863 for a down payment
John plans to buy a vacation home in 11 years from now and wants have saved $43,863 for a down payment. How much money should he place today in a savings account that earns 5.10% per year (compounded daily) to accumulate money for his down payment? Round answer to two decimal place.
We can calculate the present value by using the following formula in excel:-
=-pv(rate,nper,pmt,fv)
Here,
PV = Present value
Rate = 5.10%/365 = 0.01397% (compounding daily)
Nper = 11*365 = 4015 periods (compounding daily)
Pmt = 0
FV = $43,863
Substituting the values in formula:
= -pv(0.01397%,4015,0,43863)
= $25,030.88
