Question

7. Catherine just graduated from TAMU, and would like to purchase a house in four (4) years. If she has $300 automatically invested out of each paycheck at the end of each month for four (4) years into an ETF earning a nominal twelve (12) percent per year, how much of a down payment will she have at the end of four (4) years?

Group of answer choices.

A. $19,124

B. $18,550

C. $18,367

D. $14,962

E. $14,400

Answer 1

Q-7)

Catherine can deposit $300 out of her paycheck at the end of each month for 4 years to accumulate amount for down-payment.

Calculating the amount she can accumulate as down-apyment using Future Value of Ordinary annuity formula:-

Where, C= Periodic Deposits = $300

r = Periodic Interest rate = 12%/12 = 1%

n= no of periods = 4 years*12 = 48

Future Value = $18,366.78

So, down payment will she have at the end of four (4) years is $18,367

Option C

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