Question

Julie would like to buy a house for $175,000. She has saved $10,000. She believes in paying cash for the house and would like to delay buying the house until she collects the entire amount. She can invest her money in a money market account that pays 6% per year. She also thinks she she can deposit an additional $950 every month - end into the money market account. How long will she have to collect the money before she can buy the house for cash?

Answer: 120.2 Months but im not sure how.

Answer 1

time period = n

monthly interest rate = 6%/12 = 0.5%

FV = 175000

monthly payments = 950

175000 = 10000 x (1 + 0.5%)ⁿ + 950 x (1 + 0.5%)^n-1 + 950 x (1 + 0.5%)^n-2 +...... + 950

(use the sum of GP of n terms or nper function)

n = 120.6 months