Question

2. You want to buy a new car 3 years from now, and you plan to save $1,000 per month, beginning today. You will deposit your savings in an account that pays a 3.6% annual interest. How much will you have 3 years from now?

A. $43, 201.80

B. $35,179.30

C. $38, 069.70

D. $27, 338.30

3. Dell computer has two promotions to sell its $3,000 laptop computers. One promotion is the low interest rate loan (the nominal annual interest rate is 1.2% for 2 years, monthly compounding) and the other one is the cash rebate. Two promotions should be indifferent for the buyers. If John chose to apply for the 1.2% amortized loan (2 years, monthly payments) to buy the computer, what's his monthly payment?

A. $144.61

B. 126.57

C. 1527.05

D. 251.63

4. Based on the Dell computer promotion, if Smith chose to pay cash at one time and get cash back. How much should he actually pay to buy the computer? If we assume the current market rate i = 9%

A. 3,000

B. 2,578.54

C. 2,688.78

D. $2,770.50

5. If Company A offers a similar laptop as Dell computer stated in Question 8, but has a different sales promotion (10% discount for the original sales price $3,000). Which laptop do you prefer to buy?

A. The laptop from Dell

B. The laptop from Company A

Answer 1

2)	C. $38, 069.70
Value of money 3 years from now	=	Monthly Cash flow	*	Future Value of annuity of 1
	=	$   1,000.00	*	38.0697
	=	$ 38,069.70
Working:
Future Value of annuity of 1	=	((((1+i)^n)-1)/i)*(1+i)	Where,
	=	((((1+0.003)^36)-1)/0.003)*(1+0.003)	i	=	3.6%/12	=	0.003
	=	38.0697		n	=	3*12	=	36