1. You want to buy a Toyota Prius on your 27th birthday. You have priced these cars and found that they currently sell for $30,000. You believe that the price will increase to $39,000 in seven years when you are ready to buy. You can presently invest to earn 9 percent. If you just turned 20 years old, how much must you save at the end of each of the next 7 years to be able to purchase the Toyota Prius in 7 years? (show your work and justify your answer.)

1. You want to buy a Toyota Prius on your 27th birthday. You have priced these cars and found that they currently sell for $30,000. You believe that the price will increase to $39,000 in seven years when you are ready to buy. You can presently invest to earn 9 percent. If you just turned 20 years old, how much must you save at the end of each of the next 7 years to be able to purchase the Toyota Prius in 7 years? (show your work and justify your answer.)

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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Similar questions

Your goal is to retire in 20 years. You plan to start on this path by saving $200 a month. If you earn 6% annually (using monthly compounding), how much will you have saved in 20 years? Right before you started saving, you were notified by your auto insurance company that you will receive a discount of $20 a month on your auto premium because of your impeccable driving record. If you chose to put those savings towards your retirement goal each month, how much would your retirement account be worth if you save $220 a month for 20 years with an annual return of 6% (compounded monthly)? Please discuss your thoughts on the impact of saving an additional $20 a month over 20 years.
Mark Smith wants to save money to meet two objectives. First, he would like to be able to retire 20 years from now and have a retirement income of $30000 per year for at least 30 years. Second, he would like to purchase a fishing boat 5 years from now at an estimated cost of $20000. He can afford to save only $6000 per year for the first 10 years. Mark expects to earn 8% per year on average from investments over the next 50 years. What must his minimum annual saving be from years 11 through 20 to meet his objectives?
You want to buy a car without going into debt. You are budgeting $58,796 for the purchase price and you want to make the purchase in 5 years. You think you can earn 9.79% per year on any savings you generate between now and the car purchase. How much will you have to deposit at the end of each month in order for you to be able to pay cash for that car in 5 years?
You currently have $12,000 saved up in your bank account. You believe that 2 years from now, some of your generous relatives will give you a combined gift of $5,000 as a college graduation present. If you can earn 4.5% annual compound interest on your savings, how many years will it take you, from today, to be able to afford the car you'd like to purchase, which costs $25,000?
I want to buy a Tesla Model S. in 10 years. The only problem is that it will cost $90,000! how much would I have to deposit each month into a savings plan offering 5.6% APR in order to have enough saved to buy the car in 10 years? What percent of the total amount saved will come from interest if I go with the monthly savings plan?
Your parents are saving to buy a new boat, at the price of $78,000. They have saved $46,840 which is invested at 4.9 percent annual interest. How many years will it be before they purchase the boat, assuming the price of the boat remains constant? 9.67 years O 17.18 years 10.66 years O 12.81 years O 16.91 years
You plan to start your own business in 5 years once you graduate from college and get situated. You plan to save 1500 every quarter for the next 5 years. The market rate you can earn is 9%; how much will your investment accumulate to when you are ready to start your business?
Dusty would like to buy a new car in six years. He currently has $15,000 saved. He’s considering buying a car for around $19,000 but would like to add a Turbo engine to increase the car’s performance. This would increase the price of the car to $23,000. If Dusty can earn 9% interest, compounded annually, will he be able to get a car with a Turbo engine in six years?

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