Question

Suppose you want to buy a new house.

• You currently have $30,000, and you figure you need to have a 10% down payment plus an additional 3% of the loan amount for closing costs.

• Assume the type of house you want will cost about $300,000

• You choose an investment with 8.5% APR (annual percentage rate) compounded semi-annually.

• How long will it be before you have enough money for the down payment and closing costs?

Answer 1

Answer:

Amount available = PV = $30,000

Amount required = FV = Cost of house * (down payment % + Closing cost %) = 300000 * (10% + 3%) = $39,000

Interest rate =  8.5% APR (annual percentage rate) compounded semi-annually

Effective annual rate = (1 + 8.5% / 2) ² - 1 = 8.680625%

Time required to $39,000 = NPER (rate, pmt, pv, fv, type)

= NPER (8.680625%, 0, -30000, 39000, 0)

= 3.1518 Years

Or

3 years and (12 * 0.1518 =) 1.82 months

Time required have enough money for the down payment and closing costs = 3.1518 Years

OR

3 years and 1.82 months