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Ima Saver has $15429 in cash. She plans to but a new car in five years....

Ima Saver has $15429 in cash. She plans to but a new car in five years. Ima is highly certain that the car will cost $29018. Ima is shopping around for a bank at which to save for the next five years. What nominal annual interest rate must the bank offer for Ima to be able to afford the car, assuming that she deposits her cash today in the account? Assume annual compounding. Also assume that the bank accounts are federally insured, so that there is no risk of loss.

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Answer #1

Ima needs that her $15,429 in cash today becomes $29,018 after 5 years.

Let the interest rate be x

15,429(1+x)^5 = 29,018

(1+x)^5 = 1.8807

x = 13.47%

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