Question

You Are interested in buying a new sierra 1500 pickup truck. after all negotiations the total cost will be 48,250. As a down payment, you decide to pay $3250 today and finance the remainder with a 72 month loan at 3.24% APR compound monthly, with first payment due in 1 month. How much is your fixed monthly Loan Payment?

Your friend spends $5 per day on lattes at his favorite coffee shop. If he were, instead, to deposit that amount each day (starting tomorrow) into an account earning 3.65% APR compounded daily, how much would he have in 20 years?

Your client has $0 savings, but wants to start saving for retirement. How many years will it take him to reach $2,500,000 if he is willing to deposit $450 per month in a fund that should earn an effective annual rate of 10.05%?

Answer 1

1. PV of Loan Amount =48250-3250 =45000
Rate Per month =3.24%/12
Number of Months =72
Fixed Monthly Loan Payment =PV/((1-(1+r)^-n)/r) =45000/((1-(1+3.24%/12)^-72)/(3.24%/12)) =688.56

2. Amount spent per day =5
Rate per day =3.65%/365
Number of days =20*365
FV =PMT*((1+r)^n-1)/r) =5*((1+3.65%/365)^(365*20)-1)/(3.65%/365))=53750.24

3.FV =2500000
PMT per month =450
Rate per month =(1+Effective Annual Rate)^(1/12)-1 =(1+10.05%)^(1/12)-1 =0.80123133155241%

Number of Years using financial calculator
I/Y =0.80123133155241%;PMT=450;FV=-2500000;CPT N =478.4224
Number of years =478.4224/12 =39.8685 or 39.87 years