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How much would need to save at the end of each month

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You're planning to buy a new car three years from today. The car you would like to buy costs $25,000 today and the price is expected to increase at a rate of 2% each year..

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Problem a. Assuming your savings will earn 3% each year (compounded monthly n=12), how much would you need to save at the end of each month over the next three years in order to pay cash for the car three years from today?

Problem b. Assume that you decide to pay $3,000 cash now and take out a 5-year $22,000 loan today to buy the car. The monthly payment on the loan is $400 payable at the end of each month. What is the annual rate on the loan?

Reference no: EM132952492

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