How much is the amount that the couple have to save to buy

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Jack and Rose just got married today. They want to start saving so they can buy a house five years from today. The average house in their town today sells for 1,500,000. Housing prices are expected to increase 3 percent a year. When they buy their house from now, Jack and Rose expect to get a 30-year (360-month) mortgage with a 7 percent nominal interest rate. They want the monthly payment on thei mortgage to be 10,000 a month.

Jack and Rose want to buy an average house in their town. They are starting to save today for a down payment on the house. The downpayment plus the mortgage will equal the expected price of the house. Their plan is to deposit 100,000 in a brokerage account today and then deposit a fixed amount at the end of each of the next five years.

Problem 1: How much will their house cost when jack and rose but it in 5 years?

Problem 2: Determine the maximum amount of mortgage they can get.

Problem 3: How much is the amount that the couple have to save to buy their house (downpayment)?

Reference no: EM132955115

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