Formula is
FV=Pmt x ( (1 + i)n - 1 ) / i
Pmt = 2800
i=2.44%/4 (quarterly)
n = 2 x 4 = 8 quarters
FV = =2800*((1+(2.44%/4))^8-1)/(2.44%/4)
FV = 22,884.12
Not enough. He needs 20% down to avoid PMI, and house prices (in some areas of the country) are going up at 10% per year.
This is a real life section; not a homework section.
Harry plans to buy a townhome in 2 years. He’d like to have a down payment towards
the purchase of the townhome. He can deposit $2,800 quarterly in an account that earns
2.44% per year compounded quarterly. How much will he have for a down payment in 2
years?
7. Identify the type of problem.
a. Future Value with compound interest
b. Present Value with compound interest
c. Future Value of an Annuity
d. Present Value of an Annuity
e. Future Value with simple interest
8. Answer the question in the problem.
a. $22,884.12
b. $23,476.23
c. $21,887.41
d. $20,457.23
e. $23,597.12