In the aftermath of the mortgage crisis, Kyle and Mary Ellis from Las Vegas, Nev

Question

In the aftermath of the mortgage crisis, Kyle and Mary Ellis from Las Vegas, Nevada, are considering remodeling their home. They originally wanted to sell their home and move to another area, but news from the Las Vegas Sun continues to show a decline in real estate values. Their plan now is to improve their home’s curb appeal as well as update the interior. They estimate the cost will be $69,000.

How much must they invest today at 8% interest compounded quarterly in order to have the money they need to remodel in 11 years? (Do not round intermediate calculations. Round your answer to the nearest cent.)

In the aftermath of the mortgage crisis, Kyle and Mary Ellis from Las Vegas, Nevada, are considering remodeling their home. They originally wanted to sell their home and move to another area, but news from the Las Vegas Sun continues to show a decline in real estate values. Their plan now is to improve their home’s curb appeal as well as update the interior. They estimate the cost will be $69,000.

Explanation / Answer

Future value = P×(1+r)^n

P is payment

r is interest rate per period

n is number of periods

$69,000 = P×(1+(8%÷4))^(11×4)

Investment required, P = $28,869.64

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