A) Lauren plans to deposit $5000 into a bank account at the beginning of next mo

Question

A) Lauren plans to deposit $5000 into a bank account at the beginning of next month and $250/month into the same account at the end of that month and at the end of each subsequent month for the next 4 years. If her bank pays interest at a rate of 5%/year compounded monthly, how much will Lauren have in her account at the end of 4 years? (Assume she makes no withdrawals during the 4-year period. Round your answer to the nearest cent.)

B) Lupe made a down payment of $2400 toward the purchase of a new car. To pay the balance of the purchase price, she has secured a loan from her bank at the rate of 10%/year compounded monthly. Under the terms of her finance agreement she is required to make payments of $230/month for 48 months. What is the cash price of the car? (Round your answer to the nearest cent.)

Explanation / Answer

using periodic payment formula and adding the amount 5000 drawing interest at 5% compounded monthly

future value =

5000 ( 1+ .05 /12)^48 + 250 ( 1+ .05/12) ^48 -1 ) / .05 /12

on solving we get

6104.47 + 11000 = $ 17104.47

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