George buys a car every 6 years for P18,000. He trades in his current car to count as the 20% downvpayment. The rest is financed at a nominal 12% interest with monthly payments over 6 years. When the loan is paid off, he trades in the car as the "20%" down payment on the next car, which he finances the same way. Jeanette has similar tastes in cars, and the dealer will count her trade-in vehicle as worth 20%. She has paid cash for old cars in the past, so she now has P14,400 in cash for the other 80% cost of a new car. In 6 years, her vehicle will be worth the "20%" down payment. She wants to make a monthly deposit so that she has the other 80% of the vehicle's cost in 6 years. Her savings account has a nominal annual interest rate of 6% with monthly compounding. What is George's payment? What is Jeanette's deposit? If Jeanette also deposits the difference in a retirement account that pays 9% nominal interest with monthly compounding, what does she have for retirement after 40 years?
George buys a car every 6 years for P18,000. He trades in his current car to count as the 20% downvpayment. The rest is financed at a nominal 12% interest with monthly payments over 6 years. When the loan is paid off, he trades in the car as the "20%" down payment on the next car, which he finances the same way. Jeanette has similar tastes in cars, and the dealer will count her trade-in vehicle as worth 20%. She has paid cash for old cars in the past, so she now has P14,400 in cash for the other 80% cost of a new car. In 6 years, her vehicle will be worth the "20%" down payment. She wants to make a monthly deposit so that she has the other 80% of the vehicle's cost in 6 years. Her savings account has a nominal annual interest rate of 6% with monthly compounding. What is George's payment? What is Jeanette's deposit? If Jeanette also deposits the difference in a retirement account that pays 9% nominal interest with monthly compounding, what does she have for retirement after 40 years?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Solutions manual only with formula and given value, without using Microsoft Excel.
Answer:
George's monthly payments are 281.52
Jeannette's monthly deposits are 238.65
The value at the end of 40 years is 224,655.50
Transcribed Image Text:George buys a car every 6 years for P18,000. He trades in his current car to count as the 20%
downvpayment. The rest is financed at a nominal 12% interest with monthly payments over 6
years. When the loan is paid off, he trades in the car as the "20%" down payment on the next car,
which he finances the same way.
Jeanette has similar tastes in cars, and the dealer will count her trade-in vehicle as worth 20%.
She has paid cash for old cars in the past, so she now has P14,400 in cash for the other 80% cost
of a new car. In 6 years, her vehicle will be worth the "20%" down payment. She wants to make a
monthly deposit so that she has the other 80% of the vehicle's cost in 6 years. Her savings
account has a nominal annual interest rate of 6% with monthly compounding.
What is George's payment? What is Jeanette's deposit? If Jeanette also deposits the difference in
a retirement account that pays 9% nominal interest with monthly compounding, what does she
have for retirement after 40 years?
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VIEWCalculation of the George's monthly payments is as follow:
VIEWCalculation of the Jeannette 's monthly deposits is as follow:
VIEWCalculation of the amount if she deposit in saving account is as follow:
VIEWCalculation of the value if the difference is deposited for retirement is as follow:
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