(Annuity payments) You plan to retire in 11 years and buy a house in Oviedo, Flo
ID: 2809846 • Letter: #
Question
(Annuity payments) You plan to retire in 11 years and buy a house in Oviedo, Florida. The house you are looking at currently costs $160,000 and is expected to increase in value each year at a rate of 4 percent. Assuming you Cam ean incent auns F niden r bhc no yne you can ean 14 percent annually on your investments, how much must you invest at the end of each of the next 11 years to be able to buy your dream home when you retire? . the house you are looking at currently costs $ 60,000 and is expected to increase in value each year a rate of 4 percent, a w the value ot then use e when you et ren n years? SRound to the nearest cent.)Explanation / Answer
a) Value of the house in 11 years considering the annual increase of 4% = 160000*1.04^11 = $ 2,46,312.65 b) The above value should be the FV of the annuity being the annual investment. Using the formula for finding FV of annuity, the annual investments to be made = 246312.65*0.14/(1.14^11-1) = $ 10,688.56
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