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How much deposit will Alessandra need for a deposit

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Question - Time Value of Money Concepts

Alessandra is interested in saving money for her first house. She currently has $10,000 saved from working part time at University. Now she has graduated, her plan is to make regular deposits into a non-registered brokerage account which will earn 8% p.a. after tax. Her new grad salary after tax is $50,000 per year and she will deposit 10% of her salary at the end of each year. Her after tax salary is expected to increase each year at 4% p.a. The deposit she needs for her house is currently $120,000. However, house prices in her local region are increasing at 5% p.a.

Required -

a) How much will Alessandra have saved for a house 6 years from now?

b) How much deposit will Alessandra need for a deposit on her house 6 years from now? Will she meet her goal?

c) Alessandra's parents will help her save for her house by matching her contributions 1 for 1 (e.g. give 1 dollar for every 1 dollar she saves). What percentage of her after tax salary should Alessandra save to reach have a deposit for her house in 6 years?

Reference no: EM132855843

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