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 |

Three-part Question:
Part A - 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...

4. You want to buy a new car in 3 years which will cost $42,000.
You plan to get a 5-year car loan at a 6% interest rate but don’t
want your monthly payments to be over $300. You plan to save the
rest needed by making monthly deposits into the bank, earning 7.5%
on your money. How much do you need to save monthly over the next 3
years to reach your goal?
6. You are buying a new...

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from now?
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(2) Pay $10,000 upfront, and $65,000 3 years from now.
(3) Make 3 equal payments at the end of every year so that the
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Annual interest rate is 12%.
Required:
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