How much must he invest each year

Reference no: EM131111600

While vacationing in Florida, John Kelley saw the vacation home of his dreams. It was listed with a sale price of $200,000. The only catch is that John is 40 years old and plans to continue working until he is 65. Still, he believes that prices generally increase at the overall rate of inflation. John believes that he can earn 9% annually after taxes on his investments. He is willing to invest a fixed amount at the end of each of the next 25 years to fund the cash purchase of such a house (one that can be purchased today for $200,000) when he retires.

a. Inflation is expected to average 5% per year for the next 25 years. What will John's dream house cost when he retires?

b. How much must John invest at the end of each of the next 25 years to have the cash purchase price of the house when he retires?

c. If John invests at the beginning instead of at the end of each of the next 25 years, how much must he invest each year?

Reference no: EM131111600

Questions Cloud

Second cyclist started biking : How much time will pass before the second cyclist catches up with the first from the time the second cyclist started biking?

Design a series of closely spaced parallel box : You must build a bridge across a 20 foot wide gully. The bridge is 4 foot wide and will be constructed of 4x8 foot plywood sheets placed on top of two composite beams that are about 4 feet apart. Design the bridge so that the two composite beams take..

What are the state and federal objectives of punishment : What are the state and federal objectives of punishment and how does sentencing affect the state and federal corrections systems overall? Support your answer.

Difficult or confusing for you to understand : You've probably noticed pop up ads that contain products or services similar to those for which you are shopping. HOW DO YOU FEEL ABOUT THIS? And is any of this content most difficult or confusing for you to understand if so Explain.... And or giv..

How much must he invest each year : Inflation is expected to average 5% per year for the next 25 years. What will John's dream house cost when he retires? How much must John invest at the end of each of the next 25 years to have the cash purchase price of the house when he retires? If ..

Contrast the coupling between two program units : Contrast the coupling between two program units obtained by a simple goto statement with the coupling obtained by a procedure call.

Express d as a function of t : a) Let h be the distance between the lighthouse and the ship. Let d be the distance from the ship has travelled since 1pm. Express h as a function of d. b) Express d as a function of t, the time elapsed since 1pm.

Discuss analogous option strategies : Discuss analogous option strategies and how you would implement them. Remember to complete all parts of the question and support your answers with examples from the text and other resources.

Solve the handshake question : Consider this problem: four people come to a party and shake hands with each other. If each shakes the hand of every other person, how many handshakes were there in all? Design a mathematical model to solve the handshake question. Explain the solu..

User Account

All Pages