Purchase of a new home John and Jane had planned to save $60 000 dollars over...

Purchase of a new home

John and Jane had planned to save $60 000 dollars over the next five years as a down payment on a house. Jane assured John that if they contributed $1000 each month to a savings account that pays an annual rate of interest of 2.5% compounded monthly that they would have enough money to put a down payment of $60 000 on their new house. Wanting their daughter to have a house, Jane’s parents (The Henrys) have offered to lend John and Jane $65 000, which they have suggested (perhaps naively) John and Jane pay back by contributing to a savings account in the Henrys’ name as per Jane’s original savings plan. John’s worried this is not fair to his in-laws. Is he correct? If so, devise a fair repayment plan that would see the Henrys repaid at a rate of 2.5% compounded monthly over the 5 years.

Solutions

Expert Solution

1. $1,153.58

2. Doe should accept 5-year fixed rate monthly mortgage plan in order to pay principle as quickly as possible.

Explanation:

Excel sheet used to solve the question :

Formula sheet :

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Purchase of a new home John and Jane had planned to save $60 000 dollars over...

Purchase of a new home John and Jane had planned to save $60 000 dollars over the next five years as a down payment on a house. Jane assured John that if they contributed $1000 each month to a savings account that pays an annual rate of interest of 2.5% compounded monthly that they would have enough money to put a down payment of $60 000 on their new house. Wanting their daughter to have a house, Jane’s parents (The...

If John wants to purchase a new home for $300,000 and finance $220,000 with either a...

If John wants to purchase a new home for $300,000 and finance $220,000 with either a 4.%, 30- year mortgage or a 3.5%, 15-year mortgage. a. What is the monthly payment on each of the above alternatives? b. How much interest would be paid in the first 12 payments for each of the above alternatives? c. What would the loan balance be after 10 years for each of the above alternatives?

If John wants to purchase a new home for $300,000 and finance $220,000 with either a...

John and Jane Brown have been living at their present home for the past 6 years....

John and Jane Brown have been living at their present home for the past 6 years. During that time, they have replaced the water heater for $375, have replaced the dishwasher for $599, and have had to make miscellaneous repair and maintenance expenditures of approximately $1,500. They have decided to move out and rent the house for $975 per month. Newspaper advertising will cost $75. John and Jane intend to paint the interior of the home and power-wash the exterior....

Jane and John Boilermaker wish to purchase a 40 acre tract of land valued at $1,900...

Jane and John Boilermaker wish to purchase a 40 acre tract of land valued at $1,900 per acre. The lender charges a $500 loan application fee and $250 for a real estate appraisal. Fees totaling 1% of the loan amount are also required to complete the loan. The fees can be added to the original loan amount. The lender requires $24,000 initial equity for this loan. The contractual interest rate is 7%. The fixed annual payments are based on a...

Joyce and Jane purchase only the Hampton home, not the Manhattan condo. (They rent their Manhattan...

Joyce and Jane purchase only the Hampton home, not the Manhattan condo. (They rent their Manhattan condo, instead.) After purchasing the Hampton home in April, they had no plans to renovate the home, as they liked its gently worn appearance. At least, they thought they did. By September, they are tired of the look and decide that it needs substantial improvements, after all. Thus, they hire an architect, designer, and contractor to design and construct a substantial addition to the...

John decides to purchase a home from Mary. Mary has John move in, pay $10,000 as...

John decides to purchase a home from Mary. Mary has John move in, pay $10,000 as a down payment, and John makes payments of $1500 per month, split between principal and interest. This is not put in writing. John pays the monthly payments for 8 months. Then, in writing, Mary sells her home to Cynthia, who pays in cash, and wants to move in. Mary tries to kick John out of the home, saying that he is only renting and...

What are the implications of her planned purchase of New World shares?

Question: Harriet Moore is an accountant for New World Pharmaceuticals. Her duties include tracking research and development spending in the new product development division. Over the past six months, Harriet has noticed that a lot of funds have been spent on a particular project for a new drug. She hears “through the grapevine” that the company is about to patent the drug and expects it to be a major advance in antibiotics. Harriet believes that this new drug will greatly...

Retirement planning. Both John and Jane have $10,000 which they will contribute to their new RRSPs...

Retirement planning. Both John and Jane have $10,000 which they will contribute to their new RRSPs on their 31st birthdays. From then on, they will contribute to their RRSPs until they are each 71. John and Jane will receive their first payments on their (respective) 71st birthdays. Each wish to receive a payment of $10,000 per month until they die. Supposing that their RRSPs earn 12% compounded monthly, what is John’s monthly contribution if he plans to live until 91?...

In Febuary of 2016, Jane is trying to decide if she should purchase a new vehicle...

In Febuary of 2016, Jane is trying to decide if she should purchase a new vehicle for her business, ABC, Inc.Assume that she will purchase the vehicle in April, 2016 and also assume that no other assets will be purchased in 2016. If Jane purchases a new BMW for $100,000, what is the maximum amount that Jame may deduct in 2016? Carol plans to drive the BMW 82% of the time for business. Jane elects to take the additional first-year...

Subjects