Opening an individual retirement account

Assignment Help Financial Management

Reference no: EM131954061

"You are opening an individual retirement account (IRA) that earns 4% interest compounded daily. You wish to make monthly deposits into the IRA. You also want to purchase a new car for $25,000. You plan to set aside $790 every month, which will be divided between your IRA and your car payment. You are considering between two options:

OPTION 1: Make a down payment of $5,200 on the vehicle and borrow $19,800 at an APR of 8%, compounded monthly for 3 years. During these 3 years, you will deposit what remains of the $790 in the IRA (i.e., you will deposit $790 minus your car payment). After the vehicle is paid off at the end of 3 years, you will deposit $790 a month into your IRA.

OPTION 2: Make a down payment of $5,200 on the vehicle and borrow $19,800 at an APR of 8%, compounded monthly for 12 years. During these 12 years, you will deposit what remains of the $790 in the IRA (i.e., you will deposit $790 minus your car payment). After the vehicle is paid off at the end of 12 years, you will deposit $790 a month into your IRA.

Your goal is to maximize the amount in your IRA at the end of 29 years. Enter the dollar value of the IRA corresponding to the best option."

Reference no: EM131954061

Questions Cloud

Calculate the after tax npv of this project : Equally important is that these cost savings can be considered the same as incremental revenues for the firm.

What is the portfolio beta and dollar returns : What are the percentage returns if you own 25 shares? what are the dollar returns? What is the portfolio beta?

Discuss the factors that affect the aggregate supply : Discuss the factors that affect the aggregate supply (shift the aggregate supply curve) and the factors that affect the aggregate demand

Build a professional-quality resume or cv : Build a professional-quality resume or CV that offers a clear representation of you and your skills. Explore the CSU-Global Career Center for additional support

Opening an individual retirement account : You are opening an individual retirement account that earns 4% interest compounded daily. Your goal is to maximize amount in your IRA at the end of 29 years.

Describe the argument or the reasoning behind the view : ACCT 2003 Analysis Project. Describe the argument, or the reasoning behind the view, in detail, making sure you get the essential points

What is the level of fixed costs for monopoly : a. What is the level of fixed costs for this monopoly? b. What is the profit maximizing quantity level for this firm? Show your steps in arriving at the answer.

Explain the different proposed product lines : Continue to utilize the Big D scenario. Work under the assumption that the sample is based upon two different proposed product lines.

Develop a paper that includes the given information : develop a paper that includes the following information as it applies to the problem, issue, suggestion, initiative, or educational need profiled.

User Account

All Pages