Sada H. answered • 01/30/21

Tutor Spot

The whole goal is to HAVE $215,000 through investing, so you can buy the house that costs $215,000. If you invest $25,000 today, in 1 year you will get $2,300 (215 x 0.092). so beginning of next year you will have a starting balance of $27,300 (25,000 + 2,300) and so on. We can keep on doing this calculation until we get up to or above $215,000 or we can plug in the following values into our financial calculator to find how many years.

N = ? (Trying to find how many years so thats why ?)

I/Y = 9.2 (Because it is annual we can just plug in 9.2)

PV = -$25,000 (PV is Present Value or in other words, what's is the amount we are investing today. Because we are INVESTING or spending money, that is why I put a negative)

PMT = 0 (We would put a value in here if we keep on investing more money throughout our time, however we are only putting in $25k at the beginning so this is 0)

FV = $215,000 (FV is Future Value so in the future we would like to get 250k so we can buy the home which is why we put this value. This is positive because we would hypothetically RECEIVE or get this money from investing.)

Once you plug those values and compute for N, it should take ~24.4 years till we get $215k.