3. At 45 years of age, Sean figured he wanted to work for 10 years more and then retire. He had invested heavily over the last 15 years, which had paid off. Sean had $375,000 in the bank and was debt-free. With only 10 years before retirement, Sean wanted to make solid financial decisions. He had located a property that seemed to meet his needs – a well maintained four-unit apartment. The price tag was $375,000, and the
3. At 45 years of age, Sean figured he wanted to work for 10 years more and then retire. He had invested heavily over the last 15 years, which had paid off. Sean had $375,000 in the bank and was debt-free. With only 10 years before retirement, Sean wanted to make solid financial decisions. He had located a property that seemed to meet his needs – a well maintained four-unit apartment. The price tag was $375,000, and the apartment required no remodeling. Sean really wanted to have $750,000 to retire with at the age of 55.
a) Sean read an article in the local newspaper stating the real estate in the area had appreciated by 5.5% per year over the last 30 years (annual compounding). Assuming the article is correct, what amount would he need to invest right now to have $750,000 in 10 years?
b) Sean realizes that he can’t put this amount in real estate right now, so he decides that he can wait until he’s 60 to retire. What
amount does he need to invest in real estate today in order to have $750,000 in 15 years? Will he be able to do this?
c) Sean meets with an investment broker who claims she averages a 7.2% annual
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