1. I need $ 120,000 five years from now. I can invest at 12%. If I have to inves
ID: 2375865 • Letter: 1
Question
1. I need $ 120,000 five years from now. I can invest at 12%. If I have to invest some amount now, how much do I need to invest?<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
2. I inherited $50,000 today from my uncle. I invested in an investment at 10%. I would make equal withdrawals at the end of every year for next 5 years and spend on vacations.
How much can I withdraw from my account every year?
3. There is a house in the market you would like to buy. The house is listed for $220,000. You will pay a down payment of $20,000. For the balance you will take 15 year loan at 6%.
What will be your annual home loan payment?
Explanation / Answer
1. I need $ 120,000 five years from now. I can invest at 12%. If I have to invest some amount now, how much do I need to invest?
Amount to be invested = 120000/(1.12)^5 = $68091.22
2. I inherited $50,000 today from my uncle. I invested in an investment at 10%. I would make equal withdrawals at the end of every year for next 5 years and spend on vacations.
How much can I withdraw from my account every year?
Amount to be withdrawn each year= 50000/PVIFA(10%,5) = 50000/3.7908 = $13189.87
3. There is a house in the market you would like to buy. The house is listed for $220,000. You will pay a down payment of $20,000. For the balance you will take 15 year loan at 6%.
What will be your annual home loan payment?
Annual home loan payment = 200000/PVIFA(6%,15) = 200000/9.7122 = $20592.55
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