As a young graduate,you have plans on buying your dream car in three years.You believe the car will cost $50,000.You have two sources of money to reach your goal of $50,000.First,you will save money for the next three years in a money market fund that will return 8% annually.You plan on making $5,000 annual payments to this fund.You will make yearly investments at the BEGINNING of the year.The second source of money will be a car loan that you will take out on the day you buy the car.You anticipate the car dealer to offer you a 6% APR loan with monthly compounding for a term of 60 months.To buy your dream car,what monthly car payment will you anticipate?

Question

Quizplus · Accepted Answer

VALUE OF CAR = FV of SAVINGS + PV of LOAN
SAVINGS: Set calculator to begin
n = 3,r = 8%,PV = $0,PMT = $5,000,FV = $17,530.56
Car loan = $50,000 - $17,530.56 = $32,469.44
LOAN:
n= 60,r=.5%,PV= $32,469.44,FV = $0,PMT = $627.73

As a Young Graduate,you Have Plans on Buying Your Dream