A family needs to save $120,000 in 11 years. They currently have $10,000 in an investment...

A family needs to save $120,000 in 11 years. They currently have $10,000 in an investment fund that incurs interest of 8% per annum, which will be there for 11 years. They also want to make monthly payments to another investment that pays interest at 12% per annum, compounding annual. What is the monthly payment the family need to make to save $120,000 in 11 years?

Solutions

Expert Solution

The future value of their current savings:

FV = PV * (1 + r)^n

FV = 10,000 * (1 + 0.08)^11

FV = 23,316.3899705461

Amount to save amount in 11 years = 120,000 - 23,316.3899705461

Amount to save amount in 11 years = 96,683.6100294539

FV = 96,683.6100294539

n = 11*12 = 132 monthly payments

r = (1 + 0.12)^(1/12) -1

r = 0.009488792935 per month

The family needs to make a monthly payment of $370.14 to save $120,000 in 11 years

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

You are trying to plan for retirement in 10 years, and currently you have $ 120,000...

You are trying to plan for retirement in 10 years, and currently you have $ 120,000 in a savings account and $ 360,000 in stocks. In addition you plan on adding to your savings by depositing $10,000 per year in your savings account at the end of each of the next 5 years and then $20,000 per year at the end of each year for the final 5 years until retirement. a. Assuming your savings account returns 7 percent compounded...

Lee needs to save a total of $10,000 in order to get started in her cupcake...

Lee needs to save a total of $10,000 in order to get started in her cupcake café venture. She is presently depositing $1,800 a year in a regular savings account earnings 2% interest. How much will she have accumulated five years from now in this regular savings account, assuming she will be leaving her Emergency Fund savings account balance untouched and for a rainy day?

You currently have $2,500 in your savings account. You would like to have $10,000 five years...

You currently have $2,500 in your savings account. You would like to have $10,000 five years from today. How much must you deposit in equal amounts at the end of each month for the next five years in order to reach your goal at an interest rate of 9% per year, compounded monthly?

You are 20 years old now and you will save $10,000 annually for the next 30...

You are 20 years old now and you will save $10,000 annually for the next 30 years and the interest rate is 9%. How much money you will have when you are 50 years old? A. $1,363,075.39 B. $899,937.73 C. $1,112,577.83 D. $998,181.47 What is the PV of $2,000 to be received in 10 years at an interest rate of 8%? A. $980.25 B. $926.39 C. $783.12 D. $1,000

You decide to save $7,000 at the end of each year for the next 11 years....

You decide to save $7,000 at the end of each year for the next 11 years. If your savings earn an annual interest rate of 4%, how much will you have saved up by the end of 11 years? Round to the nearest cent.

Item11 Item 11 Item 11 An investment project costs $10,000 and has annual cash flows of...

Item11 Item 11 Item 11 An investment project costs $10,000 and has annual cash flows of $2,820 for six years. a. What is the discounted payback period if the discount rate is zero percent? (Enter 0 if the project never pays back. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the discounted payback period if the discount rate is 4 percent? (Enter 0 if the project never pays back. Do...

Amanda, age 25, currently has $10,000 in her savings account. She figures that she can save...

Amanda, age 25, currently has $10,000 in her savings account. She figures that she can save $20,000 per year at the start of each year (starting one year from now) indefinitely. She thinks that she can earn an after-tax return of 8% on her investments. She wants to have $1,000,000 at which point she will retire. How long will it take her to achieve her goal? Round your answer to 1 decimal point.

A. Bravo Ltd needs to save $50 million to expand its production lines in six years’...

A. Bravo Ltd needs to save $50 million to expand its production lines in six years’ time. There are three investment options to consider: ABC bank: monthly payments due at the end of each month. The interest rate is 3.5% p.a. compounding monthly. XYZ bank: annual payments due at the end of each year. The interest rate is 3.55% p.a. CDC bank: payments to be made at the end of year 2, 4 and 6. The interest rate is 3.56%...

Your investment portfolio consists of $10,000 shares of Dell. The expected return on Dell is 11%,...

Your investment portfolio consists of $10,000 shares of Dell. The expected return on Dell is 11%, with a standard deviation (volatility) of 43%. Suppose the risk-free rate is 4%, the expected return on the market is 9% and the volatility of the market is 18%. a) Find a portfolio on the Capital Market Line has the same expected return as Dell. What is the volatility of that portfolio? What mix of the market portfolio and the risk-free asset would give...

You borrowed $120,000 for 30 years at 6%. Thirteen years have gone by and you realize...

You borrowed $120,000 for 30 years at 6%. Thirteen years have gone by and you realize interest rates have fallen to 4.25%. You ask your bank about this, and they agree to give you that rate if you will pay $4000 in fees. They recommend you borrow the money for only 17 years, because that was all that was left on your original loan. What is the effective rate of refinancing this debt? I know that the answer is 28.89%...

Subjects