Question

In: Finance

Becky Sayers wants to buy a house in five years. She hopes to be able to make a down payment of $25,000 at that time

Becky Sayers wants to buy a house in five years. She hopes to be able to make a down payment of $25,000 at that time. If the bank CD she wants to invest in will pay 5.5 percent annually, how much will she have to invest today?

Solutions

Expert Solution

Ans:- Present Value = Future Value / (1+r)^n, where r is the rate of return, and n is the number of years.

Future Value = $25,000, r=5.5%, n=5

Present Value =$25,000 / (1+5.5%)^5= $19,128.36.(approx).

Therefore, she needs to invest 19.128.36 to be able to make a down payment at that time.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Eowyn wants to buy a house that is priced at $235,000. She makes a down payment...
Eowyn wants to buy a house that is priced at $235,000. She makes a down payment of 20% and then finances the balance with a loan that will require her to make monthly payments for thirty years, with the first payment due one month after the purchase of the house. If her lender charges 4.25% per year compounded monthly, find the outstanding loan balance after she makes 7 years of payments.
You are ready to buy a house, and you have $25,000 for a down payment and...
You are ready to buy a house, and you have $25,000 for a down payment and closing costs. Closing costs are estimated to be 4% of the loan value. You have an annual salary of $48,000 (monthly income $4000) , and the bank is willing to allow your monthly mortgage payment to be equal to 25% of your monthly income. The interest rate on the loan is 7.2% per year with monthly compounding (.6% per month) for a 30-year fixed...
"Ms. Jones wants to buy a new car for $30,000. She will make a down payment...
"Ms. Jones wants to buy a new car for $30,000. She will make a down payment of $15,000. She would like to borrow the remainder from a bank at an interest rate of 9.6% compounded monthly. She agrees to pay off the loan monthly for a period of 3.25 years. Assume that Ms. Jones has made 16 payments and wants to figure out the balance remaining immediately after the 16th payment. Determine the remaining balance." Show all work
1) April wants $7,000 saved in 4 years to make a down payment on a house....
1) April wants $7,000 saved in 4 years to make a down payment on a house. How much money should she invest now at 3.15% compounded semiannually in order to meet her goal? 2) How much will need to be invested at the beginning of every 2 months at 7.7% compounded every 2 months, to pay off a debt of $24,000.00 in 5 years? The every 2 months payments are $. (Round to 2 decimal places.)
A young professional couple buy a house for $600,000. They make a down payment of $60,000...
A young professional couple buy a house for $600,000. They make a down payment of $60,000 and agree to amortise the rest of the debt with quarterly payments made at the end of each quarter over the next 20 years. The interest on the debt is 12% per annum compounded quarterly. 5(a). (i) What type of annuity is this? (ii) How many payments are made in total? (iii) What is the interest rate per period? (iv) Write down an explicit...
You purchase a town house for $250,000. Since you are able to make a down payment...
You purchase a town house for $250,000. Since you are able to make a down payment of 20 percent ($50,000), you are able to obtain a $200,000 mortgage loan for 20 years at a 5 percent annual rate of interest. a. What are the annual payments that cover the interest and principal repayment? b. How much of the first payment goes to cover the interest? c. How much of the loan is paid off during the first year? d. What...
Your friend purchases a $165,000 house. He is able to make a 20% down payment. The...
Your friend purchases a $165,000 house. He is able to make a 20% down payment. The bank will give him a 30-year loan with a 4% APR. How much interest will your friend pay over 30 years to his loan? (round to the nearest cent)
Brianna is buying a house for $190,000. She plans to make a 14% down payment. Closing...
Brianna is buying a house for $190,000. She plans to make a 14% down payment. Closing costs include $400 for 6 months of homeowners insurance, $1200 for 6 months of property tax, $125 for the title fee, and $450 in transaction fees. Brianna also agreed to pay two points in exchange for a 0.5% reduction in interest rate. Determine the amount of money Brianna needs to cover closing costs. Round your answer to the nearest cent.
1. Suppose you wish to buy a house for $500,000. You make a 25% down payment...
1. Suppose you wish to buy a house for $500,000. You make a 25% down payment and borrow the rest at an interest rate of 6% for 30 years. (a) What is your annual repayment? (b) Repeat the above assuming a mortgage term of 25 years. 2. Suppose you borrow $20,000 to buy a car. The interest rate is 11% and the loan is for 8 years. (a) What is your annual repayment? (b) What is the remaining balance after...
1. Suppose you wish to buy a house for $500,000. You make a 25% down payment...
1. Suppose you wish to buy a house for $500,000. You make a 25% down payment and borrow the rest at an interest rate of 6% for 30 years. (a) What is your annual repayment? (b) Repeat the above assuming a mortgage term of 25 years. 2. Suppose you borrow $20,000 to buy a car. The interest rate is 11% and the loan is for 8 years. (a) What is your annual repayment? (b) What is the remaining balance after...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT