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Calculating the Time Value of Money for Savings Goals. If you desire to have $20,000 for...

Calculating the Time Value of Money for Savings Goals. If you desire to have $20,000 for a down payment for a house in five years, what amount would you need to deposit today? Assume that your money will earn 4 percent.

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Answer #1

To desire $20000 in 5 years, one can deposit money in bank and get interest through compounding. So, to arrive at money to be deposited today, we will use compounding formula with interest rate 4 % and time period 5 years.

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