Question

# You want to start saving for a new car and have decided to put \$90 per...

You want to start saving for a new car and have decided to put \$90 per month at the beginning of each month into an account which earns 6% compounded monthly. You would like to be able to buy a car for \$25,000.

(a) How many deposits will you have to make to reach your \$25,000 goal?

(b) How many years will that be?

Please indicate what you entered into your calculator to solve these problems.

Buying price of car = FV = \$ 25000
Present value = PV = \$ 0
Payments every month at beginning = PMT = \$ 90
Interest rate = I/Y = 6 % /annum = 6 % / 12 = 0.5 / month
Number of months = N = ?

Substituting the values in with the given buttons as indicated in financial calculator we get

Keeping the calculator in BEGIN mode as \$ 90 is paid at the beginning of every month

Number of months = N = 174.02 ~ 175

a) Number of deposits for reaching \$ 25000 goal = 175

b) Number of years = 175 / 12 = 14.583 years