Use the table below to answer the question: Alicia gets a yearly alimony payment

Question

Use the table below to answer the question: Alicia gets a yearly alimony payment from her ex-husband and wants to saves enough to put a 30% down payment on a home in 5 years. Median homes are currently at $600,000. How much should Alicia put away into an investment each year if she can get a 6% return a year? Median homes prices are expected to appreciate at the inflation rate of 3%? Select one $49.537 $18.239 $24,408 $37.017 Use the table below to answer the question: Alicia wishes to S3ve $300,000 in 5 years from alimony she receives. If Alicia receives alimony payments every 6 months and the next payment is tomorrow, how much money should she put away into a 0% return investment each time she receives an alimony payment? Select one $26.609 $25.469 $35,609 $34.083

Explanation / Answer

1.

Current price of homes = $600,000

Inflation rate = 3%

Price of homes after 5 years = $600,000 * 1.035 = $600,000 * 1.1593 = $695,580

Amount required after 5 years = 30% * $695,580 = $208,674

Future value of annuity = Annuity * Future value of annuity factor

$208,674 = Annual investment * Future value of annuity factor at 6% for 5 years

$208,674 = Annual investment *5.6371

Annual investment = $208,674/5.6371 = $37,017.97

Hence, Answer is d.$37,017

2.

Amount required after 5 years = $300,000

No. of investment required = 5 years * 2 = 10

Half yearly interest rate = 6%/2 = 3%

$300,000 = Half yearly investment * Future value of annuity factor at 3% for 10 years

$300,000 = Half yearly investment * 11.4408

Half yearly investment = $300,000/11.4408 = $26,221.94

Hence, Answer is a.$26,609

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