The solution to this problem requires time value of money calculations. Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. Josh and Sara want to buy a house in 4 years. If the house will cost $180,000, how much must they deposit at the end of every year for the next 4 years at 5% compounded annually in order to buy the house?
A) $41,763
B) $32,040
C) $36,990
D) $45,000

Question

Quizplus · Accepted Answer

The correct answer is A because $41,763 is the future value of an annuity due of $1 for 4 years at 5% compounded annually.

The Solution to This Problem Requires Time Value of Money