A couple wishes to save $20,000 for a down payment on a house to be bought in five years. They have $1100 saved so far in cash at home. They find a savings account paying 5% per year compounded monthly. a. How much will they deposit each month starting one month from now if they wish to have the money saved in five years? They will deposit the $1100 now and the first monthly payment in one month. b. Find the exact amount that will be saved in the account. It should be less than $20000 if you have done your calculations correctly. How much is it short by? Now add 0.01 to the monthly payment and calculate the new balance in the bank. c. They figure that they will be able to afford to pay between $1000-1200 per month once they buy the house. If they plan to take out a 25-year mortgage at 3% effective interest, with their down payment of $20000, taxes are 15% and lawyer fees are 4% of the purchase price. What range of house prices should they be looking for?

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