Question

(1) You want to buy a new sports car from Muscle Motors for $68,000. The contract is in the form of a 72-month annuity due at an APR of 6.75 percent. What will your monthly payment be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Monthly payments: _____

(2) You're trying to save to buy a new $202,000 Ferrari. You have $52,000 today that can be invested at your bank. The bank pays 6 percent annual interest on its accounts. How long will it be before you have enough to buy the car?

Number of years: _____

(3) Assume the total cost of a college education will be $250,000 when your child enters college in 17 years. You presently have $75,000 to invest.

What annual rate of interest must you earn on your investment to cover the cost of your child: _____

(4) You are planning to save for retirement over the next 35 years. To do this, you will invest $900 per month in a stock account and $500 per month in a bond account. The return of the stock account is expected to be 11 percent, and the bond account will pay 7 percent. When you retire, you will combine your money into an account with a 8 percent return.

How much can you withdraw each month from your account assuming a 30-year withdrawal period? _____

Answer 1

1	Monthly payment	$1,151.19
2	Number of years	23.29
3	Annual rate	7.34%
4	Fv at retiremement-Stock	$307,430.60
	Fv at retiremement-Bond	$69,118.44
	Total FV	$376,549.04
	Monthly withdrawal	$2,762.98

WORKINGS