You want to buy a house within 3 years, and you are currently saving for the down payment. you plan to save $5,000 at the end of the first year, and you anticipate that your annual savings will increase by 10% annually thereafter. your expected annual return is 7%. how much will you have for a down payment at the end of year 3?

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Business

Michael George

30 January, 14:55

You want to buy a house within 3 years, and you are currently saving for the down payment. you plan to save $5,000 at the end of the first year, and you anticipate that your annual savings will increase by 10% annually thereafter. your expected annual return is 7%. how much will you have for a down payment at the end of year 3?

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Myles Jensen · Answer 1

Answer: Just get the FV of each year's cash flow.

At T1 - 5,000, N 2, R 7%, Compute FV at T3 - 5,724.50

At T2 - 5,500, N 1, R 7%, Compute FV at T3 - 5,885.00

At T3 - 6,050, N 0, FV at T3 - 6,050

Total at T3 - 17,659.50