Question
As part of your investment plan, you have set the goal of buying a $1,000,000 property in 10 years. 1.) You assume that the bank
As part of your investment plan, you have set the goal of buying a $1,000,000 property in 10 years.
1.) You assume that the bank will require you to deposit 20% of the house price and approve your mortgage loan of 80% of the house price. What is the amount of deposit you must have in 10 years?
2.) If you currently have no saving allocated for this financial goal of saving for the deposit of the house, how much do you have to save monthly into your bank account that pays 3.75% annual interest rate, compounded monthly? [Clearly show all formula(s), steps, relevant figures and final answer. Round only the final answer to two decimal places, where applicable.]
3.) Suppose you currently have a saving of $100,000 in the bank earning an annual interest rate of 3.75%, compounding monthly. In addition to this saving, you plan to save more periodically by depositing cash into your bank account that also earns 3.75% annual interest rate, compounded monthly. How much do you need to contribute monthly to attain your saving goal (the amount of house deposit)? [[Clearly show all formula(s), steps, relevant figures and final answer. Round the answer to two decimal places, where applicable.]
4.) Compare your answers in parts (2) and (3). Which monthly contribution is lower? Clearly explain why. Use relevant figures to illustrate your point.
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