Juan and Rachel Burpo plan to buy a time-share in six years of $16,860. In order to have adequate funds to do so, the Burpo want to make a deposit to their money market fund today. Assume that they will be able to earn an investment rate of 5.75%, compounded annually. How much will Juan and Rachel need to deposit today to achieve their goal? (Round off to the nearest dollar.)

Question

Juan and Rachel Burpo plan to buy a time-share in six years of $16,860. In order to have adequate funds to do so, the Burpo want to make a deposit to their money market fund today. Assume that they will be able to earn an investment rate of 5.75%, compounded annually. How much will Juan and Rachel need to deposit today to achieve their goal? (Round off to the nearest dollar.)
How do you compute the compounded annually?

Henry · Answer

P = Po(1+r)^n. P = $16,860. r = 5.75%/100 = 0.0575 n = 1Comp./yr. * 6yrs. = 6 Compounding periods. Po = ?.

Anonymous · Answer

12,055.22