Question

You plan to retire in

1212

years and buy a house in Oviedo, Florida. The house you are looking at currently costs

$80 comma 00080,000

and is expected to increase in value each year at a rate of

66

percent. Assuming you can earn

1111

percent annually on your investments, how much must you invest at the end of each of the next

1212

years to be able to buy your dream home when you retire?

Assuming you can earn

1111

percent annually on your investments, how much must you invest at the end of each of the next

1212

years to be able to buy your dream home when you retire?

$nothing

(Round to the nearest cent.)

Answer 1

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

Hence future value of house=$80,000*(1.06)^12

=$80,000*2.012196472

=$160,975.7178

Future value of annuity=Annuity[(1+rate)^time period-1]/rate

$160,975.7178=Annuity[(1.11)^12-1]/0.11

$160,975.7178=Annuity*22.71318724

Annuity=$160,975.7178/22.71318724

which is equal to

=$7087.32(Approx).