Reference no: EM132553940

While vacationing in Florida , John Kelly saw the vacation home of his dreams.It was listed with a sale price of $159,000.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 11% annually after taxes on his investment.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 $159,000) when he retires

Question 1: Inflation is expected to average 4% a year for the next 25 years.What will John's dream house cost when he retires?

Question 2: 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?

Question 3: 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?