1) You want to buy a $24,000 car. The company is offering a 3% interest rate...

1) You want to buy a $24,000 car. The company is offering a 3% interest rate for 48 months (4 years). What will your monthly payments be?

2) Suppose you want to have $800,000 for retirement in 20 years. Your account earns 4% interest. How much would you need to deposit in the account each month?

Expert Solution

1.
PV = $24,000
Nper = 48
Rate = 3% / 12 = 0.25%
FV = 0

Monthly payment can be calculated by using the following excel formula:
=PMT(rate,nper,pv,fv)
=PMT(0.25%,48,-24000,0)
= $531.22

Monthly payment = $531.22

2.
FV = $800,000
Nper = 20 * 12 = 240
Rate = 4% / 12
PV = 0

Monthly deposit can be calculated by using the following excel formula:
=PMT(rate,nper,pv,fv)
=PMT(4%/12,240,0,-800000)
= $2,181.18

Monthly deposit = $2,181.18

jeff jeffy answered 2 years ago

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