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Expected purchase price of the appliance package

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Assume you plan to replace your kitchen appliances in 4 years with an appliance package similar to one that sells for $10,000 today. Each answer is worth 2 points

a. What is the expected purchase price of the appliance package in 4 years if the expected rate of inflation is 3% per year and appliance prices are expected to increase by the rate of inflation? Round the expected price up to the nearest one hundred. Answer:

b. If you plan to save to pay cash for the purchase, how much must be deposited today in an account that earns 2.4% annual interest after taxes, compounded quarterly? Answer:

c. How much must be deposited each quarter in an account that earns 2.4% annual interest after taxes, compounded quarterly to have the cash for the purchase in 4 years? Answer:

d. Suppose you decide to borrow money in 4 years and use an installment loan to pay for the appliance package. What is the monthly payment on the loan if the annual interest rate on the loan is 9.6%, interest is compounded monthly, and the payback period is 3 years? Answer:

e. What is the total amount interest paid on the loan

Reference no: EM133127270

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