Question

. You plan to buy a Ferrari sports car in 5 years. Your dream model costs $225,000 now and you expected the price to go up 10% per year. To get your dream car, you plan to make a monthly saving starting one month from now for 60 monthly savings. How much do you need to save each month in order to buy the car in 5 years, assuming that the interest rate is 6% (find the answer that is closet to your solution). A. $64,282 B. $5,357 C. $5,194 D. $3,750

Answer 1

First, the price of the car in 5 years with the increase in price needs to be computed.

Enter the below to compute the cost of the car in 5 years:

PV= -225,000

N=5

I/Y= 10

Press the CPT key and FV to compute the price in 5 years.

The value obtained is 362,364.75.

The price of the car in 5 years is $362,364.75.

Next, the amount of monthly saving needs to be computed.

Enter the below in a financial calculator to compute the amount of monthly saving:

FV= 362,364.75

N= 60

I/Y= 6/12= 0.5

Press the CPT key and PMT to compute the amount of monthly saving.

The value obtained is 5,193.70.

Therefore, the amount of monthly saving is $5,193.70$5,194.

Hence, the answer is option c.

In case of any query, kindly comment on the solution.