Joe expects to graduate from WSU in December 2019 and immediately take a full-ti

Question

Joe expects to graduate from WSU in December 2019 and immediately take a full-time job in his family's construction firm. At that time, Joe could buy a new car using a loan requiring payments of $490 a month for six years, with the first payment being made on February 1,2020, and the last payment being made on January 1, 2026. The nominal annual interest rate will be %, cCompounded monthly. Being forward thinking, Joe instead wants to buy the car for cash in January 2020, right after he graduates. With that in mind, he started saving $400/month with the first deposit on February 1, 2015. The savings account pays 9% nominal interest Compounded monthly. The last deposit will be made on January 1, 2020. Will Joe have saved up enough money to purchase the car for cash in January 2020?

Explanation / Answer

We have

Investment for purchasing car=

490/12 x 6 x 6/1200 = 1.23

And the car interest

= 400/12 x 6 x 9/100 = 18

Balance= 18-1.23

= 6.78

Hence he will be able to purchase the car

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