You want to buy a home in 5 years, and you think at that time you will be able to afford to buy a home in the price range of $750,000. You will have to save for a down payment of 20% of the purchase price. If investment rates are 10%, how much do you have to put in the account MONTHLY to reach your goal of the 20% down payment? ( Hint: Calculate the 20% down payment first, then the MONTHLY payment needed to reach your goal. You will then have to borrow the balance after your down payment from the bank. You can get a loan from your bank at a rate of 6% annually for 25 years. What will your MONTHLY payment be? Reference the below formulas when solving the problem above: PV = FV / (1+r)^t FV = PV(1+r)^t
You want to buy a home in 5 years, and you think at that time you will be able to afford to buy a home in the price range of $750,000. You will have to save for a down payment of 20% of the purchase price. If investment rates are 10%, how much do you have to put in the account MONTHLY to reach your goal of the 20% down payment? ( Hint: Calculate the 20% down payment first, then the MONTHLY payment needed to reach your goal. You will then have to borrow the balance after your down payment from the bank. You can get a loan from your bank at a rate of 6% annually for 25 years. What will your MONTHLY payment be? Reference the below formulas when solving the problem above: PV = FV / (1+r)^t FV = PV(1+r)^t
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:You want to buy a home in 5 years, and you think at that time you will be
able to afford to buy a home in the price range of $750,000. You will have
to save for a down payment of 20% of the purchase price. If investment
rates are 10%, how much do you have to put in the account MONTHLY to
reach your goal of the 20% down payment? (Hint: Calculate the 20% down
payment first, then the MONTHLY payment needed to reach your goal.
You will then have to borrow the balance after your down payment from
the bank. You can get a loan from your bank at a rate of 6% annually for 25
years. What will your MONTHLY payment be?
Reference the below formulas when solving the problem above:
PV = FV / (1+r)^t
FV = PV(1+r)^t
FVA = PMT(((1+r)^t) -1) / r
FVA = PMT((1+(r/12)^t(12))-1)/(r/12)
PVA = PMT(((1-(1+r)^-t) / r))
PVA = PMT((1-(1+(r/12))^-t(12)))/(r/12)
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