Life Planning Using TVM: Please show how you obtained the answer, so I can have a better understanding. 1. You want to buy a $250,000 house 5 years from now. If you have no money to begin with, how much do you need to save at the end of each year to have 20% of the$250,000 purchase price? You plan to invest your savings with your broker who will allocate it into various asset classes. You hope to earn 8% on your money for the next 5 years. How much do you need to save at the end of each year? How does this change if you can only earn 6% return.
Using 8% return on savings the years payment (PMT): $8,522.82
Using financial calculator BA II Plus - Input details: |
# |
FV = Future Value = -2500000*20% = |
-$50,000.00 |
PV = Present Value = |
$0.00 |
I/Y = Rate / Frequency = |
8.000000 |
N = Total number of periods = Number of years x frequency = |
5 |
CPT > PMT = Payment = Saving per year = |
$8,522.82 |
Using 6% return on savings the years payment (PMT): $8,869.82
Using financial calculator BA II Plus - Input details: |
# |
FV = Future Value = -2500000*20% = |
-$50,000.00 |
PV = Present Value = |
$0.00 |
I/Y = Rate / Frequency = |
6.000000 |
N = Total number of periods = Number of years x frequency = |
5 |
CPT > PMT = Payment = Saving per year |
$8,869.82 |
At 6% we have to save more.
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