Inflation, time value, and annual deposits Personal Finance Problem While vacationing in Florida, John Kelley saw the vacation home of his dreams. It was listed with a sale price of $203.000. The only catch is that John is 40 years old and plans to continue working until he is 65. John believes that prices generally increase at the overall rat of inflation and that he can earn 8% on his investments. He is willing to invest a fixed amount at the end of each of the next 25 years to fund the cash purchase of such a house (one that can be purchased today for $203.000) when he retires a Inflation is expected to average 3% a year for the next 25 years. What will John's dream house cost when he retires? b. How much must John invest at the end of each of the next 25 years to have the cash purchase price of the house when he retires? c. John invests at the beginning instead of at the end of each of the next 25 years, how much must he invest each year?
Inflation, time value, and annual deposits Personal Finance Problem While vacationing in Florida, John Kelley saw the vacation home of his dreams. It was listed with a sale price of $203.000. The only catch is that John is 40 years old and plans to continue working until he is 65. John believes that prices generally increase at the overall rat of inflation and that he can earn 8% on his investments. He is willing to invest a fixed amount at the end of each of the next 25 years to fund the cash purchase of such a house (one that can be purchased today for $203.000) when he retires a Inflation is expected to average 3% a year for the next 25 years. What will John's dream house cost when he retires? b. How much must John invest at the end of each of the next 25 years to have the cash purchase price of the house when he retires? c. John invests at the beginning instead of at the end of each of the next 25 years, how much must he invest each year?
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
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Transcribed Image Text:Inflation, time value, and annual deposits Personal Finance Problem While vacationing in Florida, John Kelley
saw the vacation home of his dreams. It was listed with a sale price of $203,000. The only catch is that John is 40
years old and plans to continue working until he is 65. John believes that prices generally increase at the overall rater
of inflation and that he can earn 8% on his investments. He is willing to invest a fixed amount at the end of each of
the next 25 years to fund the cash purchase of such a house (one that can be purchased today for $203.000) when
he retires
a. Inflation is expected to average 3% a year for the next 25 years. What will John's dream house cost when
he retires?
b. How much must John invest at the end of each of the next 25 years to have the cash purchase price of the house
when he retires?
c. If John invests at the beginning instead of at the end of each of the next 25 years, how much must he invest
each year?
a. When he retires, John's dream house will cost $(Round to the nearest cent.)
b. The amount John must invest at the end of each of the next 25 years to have the cash purchase price of the house
when he retires iss (Round to the nearest cent.)
e. If John invests at the beginning instead of at the end of each of the next 25 years, the amount he must invest each
year is (Round to the nearest cent)
s
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