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Determine the expected value

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Reference no: EM131623737

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.

  1. Determine the expected value of the house in 5 years from now.
  2. How much would you have to invest each year as an ordinary annuity to have enough
  3. money to purchase the house in 5 years from now?
  4. Instead of making annual investments, you decide to make a single investment today.
  5. 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?

Reference no: EM131623737

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