Probability and statistics: Finances

Question

I need help with this question for my probability and statistics class. I have no idea how to solve this.

Question:

How much must be invested in an account paying 5% APR (annual percentage rate) compounded annually if you want to buy a $300,000 house in 7 years?

Answer 1

The formula to use = A =P(1+R/N)^N*T

^Given:

^{A = Final Amount = $ 300,000}

^{P= Initial Investment = P}

^{R= Interest rate = 5%}

^{N = Number of Compound periods = 1}

^{T= Time = 7 years}

^Solution:

A =P(1+R/N)^N*T

$300,000 = P (1+.05/1) ^1*7

$300,000 = P (1.05) ⁷

$300,000 = P (1.4071)

$300,000 = P

1.4071

Answer P = $ 213,204.46