9 FSDNPT (HW) - B) 18.68840130 years C) 19 years D) 18.7...

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You want to save enough money to buy your first house and have selected a target house costing $200,000. Due to arbitrary circumstances, I, the creator of this problem, have decided that you are required to pay the full amount in order to purchase the house. You currently have $50,000 available to put in the local bank. The bank pays a ridiculously high 7.7% annual interest on all accounts. How long will it take for you to save up the money required for purchasing the house? A) 18 years
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Unformatted text preview: B) 18.68840130 years C) 19 years D) 18.7 years E) 19.68840130 years Correct Answer: 19 years Algebraic Solution: FV = PV(1 + r ) t Solving for t , we get: 200,000 = 50,000 (1.077) t 200,000/50,000 = (1.077) t t = 18.68840130 the answer is 19 years since the bank does not issue any interest payments to you at time 18.68840130 years Calculator Solution: 18.68840130-50,000 200,000 N I/Y PV PMT FV 7.7 or 19 years (due to the bank paying annual interest payments) Notes: none...
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This note was uploaded on 05/26/2011 for the course FINA 3000 taught by Professor Laplante during the Spring '08 term at University of Georgia Athens.

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9 FSDNPT (HW) - B) 18.68840130 years C) 19 years D) 18.7...

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