You have always wanted to settle down on a different planet. NASA has recently announced that...

You have always wanted to settle down on a different planet. NASA has recently announced that it plans to construct and sell houses on the planet MARS. The current price of the house is $100,000 which is expected to increase every year at the inflation rate. You have just graduated from College and are currently 20 years old, you plan on working till the age of 40, save enough money and then move to MARS. You can earn 10% annually after taxes on your savings and will save/invest a fixed amount of money for the next 20 years to fund your MARS home. a. Inflation is expected to average 7% per year for the next 20 years. What will your MARS house cost once you are ready to move? (4 points) b. How much should you invest at the end of each of the next 20 years to have the cash purchase price of the house when he retires? Would your answer be different if you plan to invest at the beginning of each year? (6 points)

Solutions

Expert Solution

a) Cost of the Mars House

Cost of the Mars House is $386,968.45

b) Investment Required at the end of each year

Investment required at the end of each year would be $6,756.32

c) Investment Required at the beginning of each year

Yes, it would change

Investment required at the beginning of each year would be $6,142.11

ekkarill92 answered 1 year ago

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