Question

In 11 years you are planning on retiring and buying a house in​ Oviedo, Florida. The house you are looking at currently costs ​$140 comma 000 and is expected to increase in value each year at a rate of 6 percent. Assuming you can earn 13 percent annually on your​ investments, how much must you invest at the end of each of the next 11 years to be able to buy your dream home when you​ retire?

Answer 1

	Price of the house at the end of 11 year
	= Current price * (1+r)^n
	Where,
	r= price growth rate
	n= no of years
	= $140000* (1+0.06)^11
	$ 2,65,761.80
	Hence we need to invest at the end of each year so that
	which can give us $265761.80
	F = P * ([1 + I]^N - 1 )/I
	Where,
	F= Future Value
	P= Periodic Payment
	I= Interest Rate
	N= Number of years
	265761.80 = P*(1+0.13)^11 -1 /0.13
	265761.80*0.13 =2.835861 P
	P =12182.91
	Therefore we need to invest 12182.91 at the end of each year