A manufacturing firm has decided to plan for the purchase of a pickup truck several years from now. At that time, the company estimates that they will need $72,000 and has decided to set aside a uniform amount of money at the end of every month to save up for this need. It believes it is possible to set aside $1,180 per month at 9% compounded monthly interest. It wishes to know how long it will take to save $72,000 and how sensitive this result is to a 5% and 10% increase or decrease in both the amount saved per month and in the interest rate., a) As a base case, determine how many months it will take to save $72,000. b) Construct a sensitivity graph to illustrate how the number of months change as a function of % change. c) This plan is most sensitive to which variable?

A manufacturing firm has decided to plan for the purchase of a pickup truck several years from now. At that time, the company estimates that they will need $72,000 and has decided to set aside a uniform amount of money at the end of every month to save up for this need. It believes it is possible to set aside $1,180 per month at 9% compounded monthly interest. It wishes to know how long it will take to save $72,000 and how sensitive this result is to a 5% and 10% increase or decrease in both the amount saved per month and in the interest rate., a) As a base case, determine how many months it will take to save $72,000. b) Construct a sensitivity graph to illustrate how the number of months change as a function of % change. c) This plan is most sensitive to which variable?

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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A manufacturing firm has decided to plan for the purchase of a pickup truck several years from now. At that time, the
company estimates that they will need $72,000 and has decided to set aside a uniform amount of money at the end of
every month to save up for this need. It believes it is possible to set aside $1,180 per month at 9% compounded monthly
interest. It wishes to know how long it will take to save $72,000 and how sensitive this result is to a 5% and 10% increase-
or decrease in both the amount saved per month and in the interest rate.,
a) As a base case, determine how many months it will take to save $72,000.
b) Construct a sensitivity graph to illustrate how the number of months change as a function of % change.
c) This plan is most sensitive to which variable?

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