Question

g- Tom and John are excited to purchase a new house. Based on where they live they can find a good house for $800,000. They need 15% of the total cost of the home available as a down payment and the rest they will take out a mortgage loan. Tom commits to saving $1,050 a month and John $490 a month. They will put their savings into an account that earns 3.4% compounded monthly. a) How many years will they need to continue to save to purchase an $800,000 home

Answer 1

Answer: 5.9 years

Explanation:

The amount they need to save is the down payment for the house:

= 800,000 * 15%

= $120,000

They are saving a total of:

= 1,050 + 490

= $1,540 per month

Interest is 3.4%/12 as it is monthly.

On excel, insert the details as shown in the attachment.

You should get 70.5 months.

In years this is:

= 70.5/12

= 5.9 years