Question
Youre trying to save to buy a vacation home that will cost $650,000. You have $150,000 today that can be invested at your bank. The
Youre trying to save to buy a vacation home that will cost $650,000. You have $150,000 today that can be invested at your bank. The bank pays 4.2 percent annual interest on its accounts. How long will it be before you have enough to buy the house (assuming the cost of the house remains unchanged)? After calculating the number of years, you determine that you do not want to wait that long. Instead, you believe you can invest a sum of money in a fund that returns an annual rate of 11%. You want to buy this home in 10 years. How much must you invest today have enough funds to buy the house?
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