3) Nalani and Steven, both in their early 20s, recently married and want to plan to save money so that they could buy a house by age 40. They estimate the cost of a home will be around $450,000 in 20 years. After pooling their savings together, they have $57,000 saved. They can invest the money in a municipal tax free bond that pays 8% interest annually and matures in 20 years. Will they have enough money to buy the home based on their current savings? How much, exactly, do they need today to be able to afford the house?

3) Nalani and Steven, both in their early 20s, recently married and want to plan to save money so that they could buy a house by age 40. They estimate the cost of a home will be around $450,000 in 20 years. After pooling their savings together, they have $57,000 saved. They can invest the money in a municipal tax free bond that pays 8% interest annually and matures in 20 years. Will they have enough money to buy the home based on their current savings? How much, exactly, do they need today to be able to afford the house?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Laura and Tommy want to make sure their newborn can attend college. They have seen estimates that the four-year cost of in-state colleges will be $160,000 in 18 years. They ask their financial advisor (they obviously didn't take this course) how much they need to save in an annuity each year over that time if they invest at a fairly low-risk rate of six percent. What was the advisor's answer (rounded to the nearest dollar)? Hint: remember that discounting is the inverse of compounding. [submit your answer with a numerical value with a comma and no dollar signs]
2. (a) A college student, Amy, decides to fund a retirement account with $2000 per year for 8 years, with the first deposit made one year from today. The rate of return will be 10%. How much will she have in her account when she retires in 40 years? (b) Amy’s friend, Dacio, decides he will start funding his retirement account 8 years from now (first payment in 9 years). He then will invest $2000 each year for 32 years. If his rate of return is 10%, how much will he have when he retires in 40 years?
Booker graduated from Baruch 10 years ago and now wants to buy his first condo. He has saved enough for a $100,000 down payment and now wants to get a $400,000 mortgage to cover the cost of his new $500,000 home. His bank is offering him either a 3% 15-year mortgage or a 4% 30-year mortgage. How much would he have to pay each month for the 3% 15-year mortgage? and How much would he have to pay each month for the 4% 30-year mortgage?
You and your sister are planning a large anniversary party 3 years from today for your grandparents' 50th wedding anniversary. You have estimated that you will need $6,500 for this party. You can earn 2.6 percent compounded annually on your savings. How much would you and your sister have to deposit today in one lump sum to pay for the entire party?
Seth and Alexandra Moore of Elk Grove Village, Illinois have an annual income of $120,000 and want to buy a home. Currently, mortgage rates are 4.0 percent. The Moores want to take out a mortgage for 30 years. Real estate taxes are estimated to be $5,160 per year for homes similar to what they would like to buy, and homeowner's insurance would be about $1,620 per year. Using a 28 percent front-end ratio, what are the total annual and monthly expenditures for which they would qualify? Round your answers to the nearest dollar. Total annual expenditures $ Monthly expenditures $ Using a 36 percent back-end ratio, what monthly mortgage payment (including taxes and insurance) could they afford given that they have an automobile loan payment of $450, a student loan payment of $350, and credit card payments of $270? (Hint: Subtract these amounts from the total monthly affordable payments for their income to determine the amount left over to spend on a mortgage.) Round your…
Suppose that you need $30,000 for your last year of college. You could go to a private lending institution and apply for a signature student loan; rates range from 7% to 14%. However, your Aunt Sally is willing to loan you the money from her retirement savings, with no repayment until after graduation. All she asks is that in the meantime you pay her each month the amount of interest that she would otherwise get on her savings (since she needs that to live on), which is 4%.What is your monthly payment to her, and how much interest will you pay her over the year (9 months)?(Fill in the blanks below and give your answers as whole numbers.)The amount of interest per month you would pay Aunt Sally is $__(1)__ .The total interest you will pay her over the year (9 months)is $__(2)__ .
Tom and Kyra Courtney are considering buying a house and are researching the potential costs. Their adjusted gross income is $144,000. The monthly mortgage payment for the house they want would be $1,450. The annual property taxes would be $9,400, and the homeowner’s insurance premium would cost them $876 per year. What is the front end ratio and will they be able to qualify?
Amanda and Zack are saving for their first child. They know he/she will be expensive and would like an extra $5000 in the bank when the baby comes. Amanda and Zack are not planning to have a baby for at least 3 years. They found a savings account that will earn 4.7% interest compounded quarterly. How much money should they invest to be financially prepared for their first child? Round to the nearest dollar.

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