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Darlene wants to purchase a car in 5 years at a price of $24,000. If she...

Darlene wants to purchase a car in 5 years at a price of $24,000. If she can earn 8% on her investments, how much does she need to set aside weekly in order to afford the car?

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Answer #1

Future Value of an Ordinary Annuity

Future Value = $24,000

Weekly interest rate (r) = 0.153846154% [8.00% / 52 Weeks]

Number of years (n) = 260 Years [5 Years x 52 Weeks]

Weekly deposit amount (P) = ?

Therefore, Future Value of an Ordinary annuity = P x [{(1+ r)n - 1} / r ]

$24,000 = P x [{(1 + 0.00153846154)260 - 1} / 0.00153846154]

$24,000 = P = [(1.491366215 – 1) / 0.00153846154]

$24,000 = P = [0.491366215 / 0.00153846154]

$24,000 = P x 319.38804

P = $24,000 / 319.38804

P = $75.14 per week

Hence, the weekly deposit amount will be $75.14

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