Question

You found your dream house. It will cost you $300000 and you will put down $50000 as a down payment. For the rest you get a 30-year 4.5% mortgage. What will be your monthly mortgage payment in $ (assume no early repayment)?

Mary's 25th birthday is today, and she hopes to retire on her 65th birthday. She has determined that she will need to have $3,000,000 in her retirement savings account in order to live comfortably. Mary currently has no retirement savings, and her investments will earn 7% annually. How much must she deposit into her account at the end of each of the next 40 years to meet her retirement savings goal?

Answer 1

1.Information provided:

Cost of the house= $300,000

Down payment= $50,000

Mortgage= $300,000 - $50,000= $250,000

Time= 30 years*12= 360 months

Interest rate= 4.5%/12= 0.3750% per month

The monthly mortgage payment is calculated by entering the below in a financial calculator:

PV= -250,000

N= 360

I/Y= 0.3750

Press the CPT key and PMT to compute the monthly mortgage payment.

The value obtained is 1,266.71.

Therefore, the monthly mortgage payment is $1,266.71.

2.Information provided:

Future value= $3,000,000

Time= 40 years

Interest rate= 7%

The amount of annual deposit is calculated by entering the below in a financial calculator:

FV= 3,000,000

N= 40

I/Y= 7

Press the CPT key and PMT to compute the annual deposit.

The value obtained is 15,027.42.

Therefore, the Mary must deposit $15,027.42 at the end of each year to meet her retirement savings goal.