You plan on purchasing a new home in the near future. You want to place 10% down on the home and finance the remaining balance. The home that you are interested in is priced at 115,732.80 and your monthly gross salary is $2,624.00. Given that monthly expenses total $1,150.12, Social Security is 6.2% of your biweekly income, Medicare is 1.45% of your biweekly income, you pay State and Federal taxes in the amount of $53.00 and $101.35 respectively biweekly, determine in how many months you will have to save for, so that you can place a down payment of 10%. Round your answers to the nearest cent and to the nearest month.
The 10% down payment is $115,732.80 × 0.10 = $11,573.28. Converting the $2,624 monthly gross salary to a biweekly amount gives about $1,211.08; after Social Security, Medicare, and the $154.35 in biweekly taxes, take-home pay is about $964.08 every two weeks, or $2,088.17 per month. After $1,150.12 in monthly expenses, you can save about $938.05 per month. $11,573.28 ÷ $938.05 ≈ 12.34, which rounds to 12 months, choice D.
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