Question
Abigail Alpaca intends buying a house in ten years time. She expects that the price in ten years time will be $425,800. a. If she
Abigail Alpaca intends buying a house in ten years time. She expects that the price in ten years time will be $425,800. a. If she expects that the inflation rate will be an effective 8% p.a. for the indefinite future, what is the value of the house today? [2] b. To purchase the house, Abigail will need to put down a deposit of 20% of the value of the house. She intends saving for the deposit by making monthly deposits into a savings account starting today, and with the last deposit in exactly 10 years time. How much must she deposit each month to be able to pay the deposit if she earns interest of J2 = 6.258%? [5] c. What real rate of interest is she receiving on her savings account? [3] d. What does Abigail expect the value of the house to be when she retires in 40 years (i.e from today)? [
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