You intend to purchase a new car upon graduation in two years. It will have a co
ID: 2756758 • Letter: Y
Question
You intend to purchase a new car upon graduation in two years. It will have a cost of $29,381, including all extra features and sales tax. You just received a $3,000 pre-graduation gift from your rich uncle that you intend to deposit in a money market account that pays 6% interest, compunded monthly. If you use the amount in the money market account for a down payment, and take out an auto loan for the remainder, how much will you need to borrow? (Round to the nearest dollar.)
*NOTE: Please use a financial calculator or formula. DO NOT USE AN EXCEL SHEET.
A) $25,880
B) $26,371
C) $39,371
D) $26,00
Explanation / Answer
ANSWER = D) $26,000
SOLUTION =
deposit in money market account @ 6% = 3000
Amount received after 2 years compounded monthly = deposit ( 1 + r/n)n*m
= 3000 ( 1 + 0.06/12)12*2
= 3381
Cost of new car in two years = $29381
Less - down payment = 3381
Amount of loan need to be borrow = 29381 - 3381 = 26000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.