1. You would like to have $44,073for the down payment on a house you plan to buy
ID: 2383817 • Letter: 1
Question
1. You would like to have $44,073for the down payment on a house you plan to buy five years after you graduate. If your investments earn 1.2% APR compounded monthly, how much do you have to invest each month, starting next month, to meet your investment goal?
2. How much would you pay today for an investment that provides you $100 each year for the next five years and $1,100 six years from now if the interest rate is 4.7%? Calculate your answer to the nearest penny.
Please show the steps by using financial caculator, thanks!
Explanation / Answer
Solution:
Given, future value of annuity = $ 44,073 after five years
Time, n = 5 years * 12 months = 60 periods
Annual Percentage Rate = 1.2 %
montly rate = 1.2 % / 12 = 0.1 %
Monthly savings = $ x
Therefore, according to the information
FV = PV ( 1 + r ) * n
$ 44,073 = x * ( 1 + 0.1 / 100 ) * 60
$ 44 , 073 / ( 1 + 0.1 / 100 ) * 60 = x
x = $ 44,073 / 58.207
x = $ 768 per month
Please ask one question per post.
$ 44,073 = PV
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