Solve the following exercise by using the present value formula.

Question

Mike Gioulis would like to have $33,000 in 4 years to pay off a balloon payment on his business mortgage. His money market account is paying 2.19% compounded daily.Disregarding leap years, how much money must Mike put in his account now to achieve his goal? Do not round intermediate calculations. Round to the nearest whole dollar.

Answer 1

2.19% compounded daily --- daily rate = .0219/365 = .00006 per day
number of days in 4 years = 1460

x(1.00006)^1460 = 33,000
x = 33000/(1.00006)^1460 = 30,232.28

Answer 2

Thank you!