Question

COMPOUND INTEREST/YIELD CALCULATIONS

For this question, use the compound interest calculator found at investor.gov

Assume you saved $10,000 and hope to invest it in a manner which would allow you to afford the down payment on a home that cost $250,000. On top of the $10,000 initial investment from your savings, you will invest $250 each month from your salary. You hope to purchase the home in ten years and plan to invest in a “safe” investment yielding between 3-7% per year over the 10 year period.  

a. How much will you need for the down payment on the house?

b. At the end of 10 years, will you have enough for your down payment?

Answer 1

a. How much will you need for the down payment on the house?

Calculator

Step 1: Initial Investment

Initial Investment

Amount of money that you have available to invest initially.

Step 2: Contribute

Monthly Contribution

Amount that you plan to add to the principal every month, or a negative number for the amount that you plan to withdraw every month.

Length of Time in Years

Length of time, in years, that you plan to save.

Step 3: Interest Rate

Estimated Interest Rate

Your estimated annual interest rate.

Interest rate variance range

Range of interest rates (above and below the rate set above) that you desire to see results for.

Step 4: Compound It

Compound FrequencyAnnuallySemiannuallyMonthlyDaily

Times per year that interest will be compounded.

The Results Are In

In 10 years, you will have $54,022.62

The chart below shows an estimate of how much your initial savings will grow over time , according to the interest rate and compounding schedule you specified.

Please remember that slight adjustments in any of those variables can affect the outcome. Reset the calculator and provide different figures to show different scenarios.

Use regions/landmarks to skip ahead to chart and navigate between data series

Total Savings

US Dollars ($)Total SavingsVariance Above (7.00%)

Future Value (5.00%)

Variance Below (3.00%)

● Variance Above (7.00%): $54,318.56

● Future Value (5.00%): $48,592.98

● Variance Below (3.00%): $43,525.05

(Calculated on investor.gov)

The Downpayment would be $48593

b. At the end of 10 years, will you have enough for your down payment?

- No, Considering the Investment amount the money not would be Enough it would be require to take Debt.