The Merton family wants to purchase a house in 18 months. They expect that it will cost  $75,000 at the time of purchase. To fund this purchase, they have the following sources of money:

Currently, they have $10,000 in a bank account that pays an APR of 4% p.a. compounded monthly.

Uncle Franco has promised to give them $1,000 a month for 18 months starting today. This money will be deposited into their bank account earning an APR of 4% p.a. (compounded monthly).
To partly fund the purchase, they will also take out a bank loan in 18 months. They can afford to make repayments of $300 per month on a 15-year loan term. The loan will have an APR of 10% p.a. compounded monthly.

In addition to the above, they plan on making quarterly payments for the next 18 months into an investment account to cover any shortfall in the amount required. How much must these quarterly payments be if the investment account pays an APR of 6% p.a. compounded quarterly?

Answer rating: 100% (QA)

To calculate the quarterly payments required for the investment account we need to determine the tot... View the full answer