Emily and Kumail 1. Background Information Emily, 28, and Kumail, 32, are engaged. They have a 4-year-old daughter. Emily and Kumail live in Teaneck NJ. Emily works for an advertising firm and is now making $82,000 a year. She expects her income to grow at 3% per year. Because it is a small firm, she does not have a pension plan. Kumail works in insurance, got his master's degree right after college, and is making $95,000 a year. He expects his income to grow at 2% per year. He works for a mid-size firm which offers a 401k to which he does not contribute. For any contributions he makes to his retirement plan and up to 6% of his income, the firm provides a one to one match. They have a total of $20,000 in their checking account (earning 0.1% per year) at Citibank and $30,000 in a savings account earning 0.2% per year. Emily carries $6,000 on her credit card, which charges an APR of 22%. Kumail has a credit card that charges an APR of 15% and he carries a balance of $4,000. Emily pays $100 per month on her card (the minimum required). Kumail pays $75 per month (also the minimum required.) Both Emily and Kumail have student loans. Emily has $20,000 in student loans charging an APR of 7% but Kumail, who got his master's from a private university, has $70,000 in student loans also charging an APR of 7%. 3) They are planning a wedding a year from now and have found a venue that offers a package deal at $35,000. The vendor offers them two payment options: (1) $10,000 down now, and then 12 monthly payments of $2,083. Alternatively, if they pay now, he will give them a 5% discount and charge only $33,250. Which option is cheaper? Do you think this offer is a good deal for Emily and Kumail? 4) Five years from now they would like to buy a house or condo. They expect that, by the time they buy, the interest rate on a 30-year fixed rate mortgage with zero points and with a 20% down- payment will be at the historical average of 6%.They do not want their mortgage to be more than 25% of their monthly income. If this is the case, what is the house they can afford to buy 5 years from now (and assuming that there is no inflation and all numbers are already incorporating taxes)? Because they need money for the down-payment, how much do they have to set aside today to have the money for the down-payment 5 years from now? Assume they can earn 5% per year on the money they set aside now for the down-payment