You are considering purchasing a house 5 years from now. The house is currently valued at $800,000 and is expected to have a capital growth of 2% per annum over the next 5 years. Suppose that you can earn 7% per annum compounded annually on your investments.
- Determine the expected value of the house in 5 years from now.
- How much would you have to invest each year as an ordinary annuity to have enough
- money to purchase the house in 5 years from now?
- Instead of making annual investments, you decide to make a single investment today.
- How much would you have to invest as a lump-sum today to have enough money to purchase the house in 5 years from now?