Jeanette Needs $15,000 as a Down Payment for a House

question 67

Multiple Choice

Jeanette needs $15,000 as a down payment for a house six years from now. She earns 3.5% on her savings. Jeanette can either deposit one lump sum today for this purpose or she can wait a year
And deposit a lump sum. How much additional money must Jeanette deposit if she waits for one
Year rather than making the deposit today?

• A) $121.03
• B) $166.67
• C) $307.00
• D) $333.33
• E) $427.09

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Definitions:

Computed

Refers to something that has been determined or calculated using a computer or calculator.

Net Present Value

A method used in capital budgeting to assess the profitability of an investment or project, calculated by discounting the expected future cash flows to their present values and subtracting the initial investment.

Present Value

The immediate value of a future amount of money or a series of payments, discounted at a given rate of return.

Compound Interest

Interest calculated on the initial principal and also on the accumulated interest of previous periods.