Task 2: Planning to Buy a House Once you graduate, you get a job at YOUR COMPANY and plan to work there for the foreseeable future. You remember from your Advanced Financial Management class something about investing rent instead of expensing it. Now that rent is the biggest portion of your monthly paycheck, this makes perfect sense. Why should you be paying off the landlord's mortgage? Why not own instead of rent the house you live in? Trouble is, you don't have any money for a down payment. You determine that you can afford to save $500 a month and that you will need $20,000 for a down payment on a house of indeterminate value. You believe that you can investment your monthly savings at 10% until you withdraw it to buy your house. on 4. If you start saving today how long will it be (in months and years, approximately) before you can buy a house? (10 points) 0.83% 500 20,000 NPER Monthly Rate Monthly Savings Down Payment Have now Months Years PMT FV PV 5. Suppose you have a trust fund that will dispense $10,000 to you when you graduate in 1 year. If you keep saving (as planned in question 1, ie. hold time constant), how much will you have to put down on your house? If this amount represents 10% of the cost of the house, what is the most you can spend on a house? (10 points) Trust Amount Same Time (as above) Year until Trust distribution Time Difference Interest Same Down Payment (as above) Total to put down on House Percent Down Home Price 10,000 calculate calculate 20,000 calculate 10.00% calculate