John plans to buy a vacation home in 11 years from now and wants have saved $43,863 for a down payment

Finance Mar 30, 2021

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.

Expert Solution

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

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