a. You would like to purchase a vacation home when you retire 7 years from now....

a. You would like to purchase a vacation home when you retire 7 years from now. The current cost of the homes that interest you is $290,581; however, you expect their price to rise at 2.13% per year for the next 7 years. How much must you save each year in nominal terms (the same amount each year) for 15 years, starting next year, to just be able to pay for the vacation home if you earn 4.54% APR (compounded annually) on your investments?

b. You will have a property tax payment due in 10 months that will cost $8,292. How much do you have to invest today to have just enough to pay your property tax bill if your investments earn 4.9% APR (compounded monthly)?

c. How much would you have to invest today to be able to withdraw $4,178 each month, for 10 months, starting 9 months from now, if your investments earn 5.56% APR (compounded monthly)?

Expert Solution

I used the FV=PV(1+r)^n calculation using Excel.

APR compounded monthly= APR%/12

Nper in Months = N/12

.

Pmt= Monthly payments

PV Present value

Fv future value

nper =Number of years

r =Rate

jeff jeffy answered 2 years ago

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