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1. Alice and Bob have a combined monthly income of
$6,000. They want to save 20% of their income for a down
payment on a house that costs $300,000. How long will it
take them to save enough money for the down payment,
assuming they have no other savings and no interest on
their savings account?
A) 12.5 months
B) 25 months
C) 50 months
D) 100 months
Answer: B) 25 months
Rationale: The down payment is 20% of $300,000, which
is $60,000. To save $60,000 in x months, they need to save
$60,000/x per month. Since they save 20% of their income,
they save 0.2 * $6,000 = $1,200 per month. Therefore,
$60,000/x = $1,200, and x = $60,000/$1,200 = 50.
However, since they save at the end of each month, they
will have enough money after 49 months, but they will
need one more month to make the payment. Therefore, the
answer is 25 months.
2. Alice and Bob have found a house that they like, but it
costs $350,000. They have saved enough for a 20% down
payment, but they need to borrow the rest from a bank. The
bank offers them a 30-year fixed-rate mortgage with an
annual interest rate of 4%. What will be their monthly
mortgage payment?
A) $1,335.58
B) $1,581.59
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