You want to buy a house. You estimate that you’ll be able to save $750 a month to put towards a downpayment on your first home.

a) If you earn a 5% rate of return compounded
monthly, how much money will you have after 5 years?

b) You need to save 20% down on your anticipated purchase price to avoid paying a PMI. What is
the maximum house price that you’ll be able to purchase?

c) You plan on financing the remaining 80% through a 30 year mortgage with monthly payments at a 5.625% interest
rate. How much will your monthly payments be?

Answer rating: 100% (QA)

a Using the formula for compound interest we have FV PV 1 rnnt where PV present value initial saving... View the full answer