1. David Puddy is hoping to purchase a nice new car for $30,000 in two years....

1. David Puddy is hoping to purchase a nice new car for $30,000 in two years. At that time he plans on taking out a 5-year loan with monthly payments and an APR of 4.75%. Based on his estimated earnings, Puddy thinks he will be able to afford monthly payments of $400 per month. Puddy plans on saving for the difference between the cost of the car and the amount he'll borrow by making monthly deposits over the next two years in a bank account that yields an annual rate of 3%.

a. What is the amount of the down payment Puddy will need to purchase this car he wants to buy in two years?

b. What is the amount of the monthly savings deposits Puddy will need to make in order to save up the amount he needs for the down payment?

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 9 months ago

Next > < Previous

Related Solutions

Sarah wants to purchase a new car that lists for $30,000. The manufacturer currently offers two...

Sarah wants to purchase a new car that lists for $30,000. The manufacturer currently offers two incentive programs. She may finance the full price of the car through the manufacturer at 0% for 5 years. Alternatively, she may arrange his own financing and receive a $3,000 discount off the price of the car. Sarah’s bank will finance the car at 4.5 percent for 5 years. Which financing option should she choose? Justify your answer.

Anna decides to take out a four-year loan for $30,000 to purchase a new car. Her...

Anna decides to take out a four-year loan for $30,000 to purchase a new car. Her loan officer tells her that she will make equal, monthly payments for the loan at an interest rate of 8 percent per year. How much, in total, did Anna pay in interest over the course of the loan?

Anna decides to take out a four-year loan for $30,000 to purchase a new car. Her...

Anna decides to take out a four-year loan for $30,000 to purchase a new car. Her loan officer tells her that she will make equal, monthly payments for the loan at an interest rate of 8 percent per year. What will the balance of the loan be after 2 years of making payments?

You borrowed $20,000 to purchase a new car. The loan was for 4 years at a...

You borrowed $20,000 to purchase a new car. The loan was for 4 years at a nominal rate of 6% per year compunded monthly. You have been making equal monthly payments on the loan. You just made your 18th payment. A) What is your monthly payment B) How much of your first payment was interest? How much of your current (18th) payment is interest? C) How much of the loan has been repaid immediately after the 18th payment? D) Based...

You are considering the purchase of a really nice home in three years. You have $100,000...

You are considering the purchase of a really nice home in three years. You have $100,000 in your bank savings account today but would rather wait to buy the house. You plan to leave the money there for three years under 4% APR with monthly compounding. You understand that this money alone will not be enough to buy the house of your dreams, so when it’s time to buy the house you will have to take out a mortgage loan....

Irene is saving for a new car she hopes to purchase either four or six years...

Irene is saving for a new car she hopes to purchase either four or six years from now. Irene invests $22,000 in a growth stock that does not pay dividends and expects a 6 percent annual before-tax return (the investment is tax deferred). When she cashes in the investment after either four or six years, she expects the applicable marginal tax rate on long-term capital gains to be 25 percent. (For all requirements, do not round intermediate calculations. Round your...

you plan to purchase the new Tesla Model 3 in 5 years. The car will cost...

you plan to purchase the new Tesla Model 3 in 5 years. The car will cost $35,000. You will be able to afford payments of $550 per month and plan to take out a 3 year loan at 4.25% to finance the purchase. What down payment would you have to provide to have your desired monthly payments. How much would you need to save each month in an account earning 3.5% interest to afford this down payment in 5 years

The Button Co. is considering the purchase of a new machine for $30,000 that has a...

The Button Co. is considering the purchase of a new machine for $30,000 that has a life of 5 years and would be depreciated on straightline basis to a zero salvage value over its life. The machine is expected to save the firm $12,500 per year in operating costs. Alternatively, the firm can lease the machine for $7,300 annually for 5 years, with the first payment due at the end of the first year. The firm's tax rate is 21...

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?

As part of your financial planning, you wish to purchase a new car 7 years from...

As part of your financial planning, you wish to purchase a new car 7 years from today. The car you wish to purchase costs $10,000 today, and your research indicates that its price will increase by 2% to 4% per year over the next 7 years. a. Estimate the price of the car at the end of 7 years if inflation is (1) 2% per year and (2) 4% per year. b. How much more expensive will the car be...

Subjects