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    Time Value of Money

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    The Stein family wants to buy a small vacation house in a year and a half. They expect it to cost $75000 at that time. They have the following sources of money.

    1. They have $10000 currently in a bank account that pays 6% compounded monthly.
    2. Uncle Murray has promised to give them $1000 a month for 18months starting today.
    3. At the time of purchase, they'll take out a mortgage. They anticipate being able to make payments of about $300 a month on a 15-year, 12% loan.

    In addition, they plan to make quarterly deposits to an investment account to cover any shortfall in the amount required. How much must those additions be if the investment account pays 8% compounded quarterly?

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    Solution Preview

    Time value of money
    The Stein family wants to buy a small vacation house in a year and a half. They expect it to cost $75000 at that time. They have the following sources of money.

    1. They have $10000 currently in a bank account that pays 6% compounded monthly.
    2. Uncle Murray has promised to give them $1000 a month for 18months starting today.
    3. At the time of purchase, they'll take out a mortgage. They anticipate being able to make payments of about $300 a month on a 15-year, 12% loan.

    In addition, they plan to make quarterly deposits to an ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer how much must those additions be if the investment account pays 8% compounded quarterly.

    $2.19

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