Question

1. The Johnsons have accumulated a nest egg of $40,000 that they intend to use as a down payment toward the purchase of a new house. Because their present gross income has placed them in a relatively high tax bracket, they have decided to invest a minimum of $2300/month in monthly payments (to take advantage of the tax deduction) toward the purchase of their house. However, because of other financial obligations, their monthly payments should not exceed $2900. If local mortgage rates are 5.5%/year compounded monthly for a conventional 30-year mortgage, what is the price range of houses that they should consider? (Round your answers to the nearest cent.)

least expensive	$
most expensive

2. Lauren plans to deposit $8000 into a bank account at the beginning of next month and $150/month into the same account at the end of that month and at the end of each subsequent month for the next 5 years. If her bank pays interest at a rate of 3%/year compounded monthly, how much will Lauren have in her account at the end of 5 years? (Assume she makes no withdrawals during the 5-year period. Round your answer to the nearest cent.)
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3. Luis has $190,000 in his retirement account at his present company. Because he is assuming a position with another company, Luis is planning to "roll over" his assets to a new account. Luis also plans to put $3000/quarter into the new account until his retirement 30 years from now. If the new account earns interest at the rate of 4.5%/year compounded quarterly, how much will Luis have in his account at the time of his retirement? Hint: Use the compound interest formula and the annuity formula. (Round your answer to the nearest cent.)

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Answer 1