Question

In: Finance

You plan to buy a car in one year. It will cost $15,000 at that time....

You plan to buy a car in one year. It will cost $15,000 at that time. You now have $5,000 in a bank that pays 12% compounded monthly. You will save for the car by making monthly deposits in the bank for the next 12 months. How much will you have to deposit each month to have enough money in total to make the purchase?

Select one:

a. $738.50

b. $835.18

c. $769.43

d. $682.80

Karl has $100,000 in student loans at 6% compounded monthly. How much will Karl's monthly payment be in order to pay off the loan in 10 years?

Select one:

a. ​$610

b. ​$13,587

c. ​$9,777

d. ​$1,110

Solutions

Expert Solution

The question is solved in two parts. Find the future value of $5,000 deposited in the bank has to be calculated. Next, the monthly deposit needed to make the payment for the car is calculated.

Future value of $5,000 deposited in the bank:

The future value of 5,000 deposited in the bank is calculated by entering the below in a financial calculator:

PV= -$5,000; I/Y= 1; N= 12

Press CPT and N to calculate the future value.

The future value of $5,000 deposited in the bank is 5,634.13

The balance money required for purchasing the car:

$15,000 - $5,634.13= 9,365.87

2.Monthly deposit for car purchase:

FV= 9,365.87; N= 12; I/Y= 1

Press CPT and N to calculate the monthly deposit.

The monthly deposit needed to make the payment for the car is $738.49.

Therefore, the answer is option a.

2.Present value= $100,000

Interest rate= 6%/12= 0.50%

Time= 10 years*12= 120 months

The monthly deposit required to be made to pay off the student loan is calculated with the help of a financial calculator by entering the below in the calculator:

PV= -100,000; I/Y= 0.50; N= 120

Press CPT and PMT to calculate the monthly payment

The monthly deposit required to be made to pay off the student loan is $1,110.20.

Therefore, the answer is option d.

                                         


Related Solutions

(32) You plan to buy a car that has a total "drive-out" cost of $21,100. You...
(32) You plan to buy a car that has a total "drive-out" cost of $21,100. You will make a down payment of $2,321. The remainder of the car's cost will be financed over a period of 4 years. You will repay the loan by making equal monthly payments. Your quoted annual interest rate is 12% with monthly compounding of interest. (The first payment will be due one month after the purchase date.) What will your monthly payment be? $581.69 $489.63...
You want to buy a car, and a local bank will lend you $15,000. The loan...
You want to buy a car, and a local bank will lend you $15,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 8% with interest paid monthly. What will be the monthly loan payment? What will be the loan's EAR? Do not round intermediate calculations. Round your answer for the monthly loan payment to the nearest cent and for EAR to two decimal places. Monthly loan payment: $ EAR: %
You are planning to buy a new car. The cost of the car is $50,000. You...
You are planning to buy a new car. The cost of the car is $50,000. You have been offered two payment plans: • A 10 percent discount on the sales price of the car, followed by 60 monthly payments financed at 9 percent per year. • No discount on the sales price of the car, followed by 60 monthly payments financed at 2 percent per year. If you believe your annual cost of capital is 9 percent, which payment plan...
It is time to buy a new car. You worked hard and want to buy an...
It is time to buy a new car. You worked hard and want to buy an expensive car (Porsche Cayenne) for $100,000. Porsche dealership will gladly finance your new purchase. However, the only way for you to be financed is to show them that you have 20% of the money needed. As soon as you have that much money in your account, the dealership will finance your new vehicle. You start saving for 52 months with the APR of 7.5%,...
You plan to buy a new car. The price is $30,000 and you will make a...
You plan to buy a new car. The price is $30,000 and you will make a down payment of $4,000. Your annual interest rate is 10% and you intend to pay for the car over five years. What will be your monthly payment?
You borrow $29,000 to buy a car. You plan to payoff the car within 6 years...
You borrow $29,000 to buy a car. You plan to payoff the car within 6 years and the APR on the car loan is 2.99%. Using an excel to create an amortization for this car payment for 72 months. Please print out your excel and turn it in for 6 points extra credit on the test. You need to turn in your own work. Can you post 24-61 please? Month Beginning Balance Monthly Payment Interest Paid Principal Paid Ending Balance...
You borrow $29,000 to buy a car. You plan to payoff the car within 6 years...
You borrow $29,000 to buy a car. You plan to payoff the car within 6 years and the APR on the car loan is 2.99%. Using an excel to create an amortization for this car payment for 72 months. Please print out your excel and turn it in for 6 points extra credit on the test. You need to turn in your own work. Month Beginning Balance Monthly Payment Interest Paid Principal Paid Ending Balance 1 2 3 ... 72...
Suppose you can buy a new car for $15,000 and sell it for $6,000 after six...
Suppose you can buy a new car for $15,000 and sell it for $6,000 after six years. Or, you can lease the car to $300 per month for three years and return it at the end of the three years. Assume that lease payments are made yearly instead of monthly (i.e., are $3,600 per year for each of the three years). a.) If the interest rate, r, is 4 percent, should you lease or buy? b.) What if the interest...
You want to buy a new sports car 3 years from now, and you plan to save $6,200 per year, beginning one year from today.
You want to buy a new sports car 3 years from now, and you plan to save $6,200 per year, beginning one year from today. You will deposit your savings in an account that pays 5.2% interest. How much will you have just after you make the 3rd deposit, 3 years from now? (Hint: Ordinary Annuity)
You plan on purchasing a new car in 9 months. The cost of the car in...
You plan on purchasing a new car in 9 months. The cost of the car in 9 months will be $25,127. How much would you have to invest today to exactly pay for the new car if you investments earn 4.86% APR (compounded monthly)?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT