You want to save for a new car so you make payments of $623 at the end of every month into the bank. When you recieve your birthday present every year you put a

Question

You want to save for a new car so you make payments of $623 at the end of every month into the bank. When you recieve your birthday present every year you put an extra $1915 into a payment on Dec 31 (at the end of the year). The interest rate on your account is 4% compounded quarterly. Assume today is January 1, and that you are going to purchase this new car with cash only in 7 years. What is the value of your new car?

Answer 1

you would need to take 623 times 12 months

Then take the 7,476 and add the 1915 to it.

 

A= P(1+ r/n)^n*t

 

A is the value of the new car

P is how much you are putting into the account

R is the interest rate

N is how often the interest is compounded

t is the number of years

 

A= 9391( 1 + .04/4)^4*7

 

A= 9391(1.01)²⁸

 

A= 9391(1.3212909669)

 

A= 12,408.24 dollars would be the price of the new car.