HomeworkLib
Question

You would like to buy a car in 2 years. The car will cost $10,000 and...

You would like to buy a car in 2 years. The car will cost $10,000 and the bank offers semiannual compounding on your savings account at an annual interest rate of 3%. How much do you need to contribute to the account at the end of each six-month period?

answer: $2,444

Plz show working progress.

business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Solution:

Semiannual interest rate = 3%/2 = 1.50%

Let semiannual contribution = X

Nos of semiannual period = 2*2 = 4

Required contribution = $10,000 / Cumulative FV factor at 1.5% for 4 periods

= $10,000 / 1.061364 = $10,000 / 4.0909 = $2,444

0 0
Add a comment
Know the answer?
Add Answer to:
You would like to buy a car in 2 years. The car will cost $10,000 and...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Assume that you want to buy a new car in 5 years, and that the price...

    Assume that you want to buy a new car in 5 years, and that the price of the car will be $30,000. (Assume all cash flows occur at the end of the period throughout all of the Excel problems throughout our entire course.) Use Excel time value of money functions to solve the problems outlined below (one or more of these: PV, FV, RATE, NPER, PMT) (This question doesn't require a text box with written answers, but you need to...

  • You would like to save annually for buying a car 6 years from today. Suppose the...

    You would like to save annually for buying a car 6 years from today. Suppose the first deposit is made today and the last deposit will be made 5 years from now. Assume the car will cost you $30,000 and your deposits earn you interest at 6% p.a. compounded annually. a. What is your annual deposit amount? b. Instead of making annual deposits, you would like to make your deposit monthly and the bank is happy to pay your interest...

  • You want to purchase a new car in 3 years and expect the car to cost $30,000.

    You want to purchase a new car in 3 years and expect the car to cost $30,000. Your bank offers a savings plan with a guaranteed APR of 5.5% if you make regular monthly deposits. How much should you deposit each month to end up with $30,000 in 3 years?

  • Jackie Rich would like to buy a $26,000 Toyota hybrid car in 5 years. Jackie wants...

    Jackie Rich would like to buy a $26,000 Toyota hybrid car in 5 years. Jackie wants to put the money aside now. Jackie’s bank offers 10% interest compounded semiannually.    How much must Jackie invest today? (Do not round intermediate calculations. Round your answer to the nearest cent.)

  • Jackie Rich would like to buy a $27,000 Toyota hybrid car in 6 years. Jackie wants...

    Jackie Rich would like to buy a $27,000 Toyota hybrid car in 6 years. Jackie wants to put the money aside now. Jackie's bank offers 4% interest compounded semiannually. How much must Jackie invest today? (Do not round intermediate calculations. Round your answer to the nearest cent.) Investment

  • You need to have 49,196 dollars to buy a new car 8 years from now. How...

    You need to have 49,196 dollars to buy a new car 8 years from now. How much do you need to save at the end of each month if your savings account pays 8% per year, compounded quarterly? (note: round your answer to the nearest cent, and do not include spaces, currency signs, plus or minus signs, or commas)

  • 1.) You are saving for clinic upgrades you would like to make 4 years from now....

    1.) You are saving for clinic upgrades you would like to make 4 years from now. How much will you have to set aside at the end of each year to have $30,000 in 5 years if the interest rate is 7.25% compounded semiannually? 2.) A business manager deposits $2,000 in a savings account at the end of each year for five years, what will be the value of her investment at an annual rate of 6.25% with daily compounding?...

  • A commercial bank will loan you $47,497 for 8 years to buy a car. The loan...

    A commercial bank will loan you $47,497 for 8 years to buy a car. The loan must be repaid in equal monthly payments at the end of the month. The annual interest rate on the loan is 10.16 percent of the unpaid balance. What is the amount of the monthly payments?

  • a commercial bank will loan you 54567 for 4 years to buy a car. the loan...

    a commercial bank will loan you 54567 for 4 years to buy a car. the loan must be repaid in equal monthly payments at the end of the month . the annual interest rate on the loan is 5-98% of the unpaid balance. what is the amount of the monthly payments?

  • You're about to buy a new car for $10,000. The dealer offers you a one-year loan...

    You're about to buy a new car for $10,000. The dealer offers you a one-year loan where you pay $882.88 every month for the next 12 months. Since you pay $882.88 * 12 = $10,595 in total, the dealer claims that the loan's annual interest rate is (10,595-10,000)/10,000 = 5.95%. What is the actual effective annual rate? What rate should the dealer quote by law? (in decimals)

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT