You invested in a 3-month certificate of deposit at your bank. Your investment was $1,902, and at the end of the term you will receive $2,178.
a. What is the holding period return (HPR) on your investment? (Round your answer to 2 decimal places.)
b. What is the annual percentage rate (APR)? (Round your answer to 2 decimal places.)
c. What is the effective annual rate (EAR)? (Round your answer to 2 decimal places.)

Answers

Answer 1

Answer and Explanation:

The computation is shown below:

a. Holding period return would be

= Income + (End of Period Value - Initial Value) ÷ Initial Value

= 0 +($2,178 - $1,902) ÷ $1,902

= 0 + $276 ÷ $1,902

= 14.51%

b. The annual percentage rate is

For 3 months, the rate is 14.51%

Now

For 12 months, it is

= 14.51% ÷ 3 ×  12

= 14.51 % × 4

= 58.04%

c. The effective annual rate is

= ( 1 + r ÷ m)^m - 1

= (1 + 58.04% ÷ 4)^4 - 1

= (1 + 0.5804 ÷ 4)^4 - 1

= (1 + 0.1451)^4 - 1

= (1.1451)^4 - 1

= 1.719387079 - 1

= 0.719387079 or 71.94%


Related Questions

For a soft drink compant, dividing the market up based on fashion preferences is an example of which segmentation variable?
A. Geographic
B. Demographic
C. Psychographic
D. Behavioral

Answers

Answer:

The correct answer is the option C: Psychographic

Explanation:

To begin with, in the field of marketing the term known as segmentation refers to the strategy of dividing the target market into different groups that characterizes themselfs because of having common features in their lifestyles of something like that for example. So when segmentation takes place there are different types of it, the psychographic segmentation is the one that focus on the psycological part of the people and their common likes, attitudes, aspirations and more. Therefore that one they are segmentating according to fashion preferences they are doing a psychographic segmentation

A monopolist can sell 10,000 units at a price of $5 per unit. Lowering price to all buyers by $1 raises the quantity demanded by 1,000 units. What is the change in total revenue resulting from this price change?

Answers

Answer:

the revenue decreases by -$6000

Explanation:

The computation of the change in revenue is shown below:

Total revenue at Price is 5

Now total revenue is

= $5 × 10,000 units

= $50,000

Total revenue at Price is 4

Now Total Revenue is

= $4 × 11,000

= $44,000

Now the difference is

= $44,000 - $50,000

= -$6,000

Hence, the revenue decreases by -$6000

Calgary Industries is preparing a budgeted income statement for 2018 and has accumulated the following information. Predicted sales for the year are $690,000 and cost of goods sold is 40% of sales. The expected selling expenses are $77,000 and the expected general and administrative expenses are $86,000, which includes $19,000 of depreciation. The company's income tax rate is 30%. The budgeted net income for 2018 is:__________
a) $414,000.
b) $175,700.
c) $251,000
d) $84,900.
e) $75,300.

Answers

Answer:

b. $175,700

Explanation:

Calgary Industries's budgeted net income for 2018 is computed as per the information above;

Sales

$690,000

Variable costs

(40% × $690,000)

($276,000)

Selling expenses

($77,000)

Administrative expenses

($86,000)

Earnings before taxes

$251,000

Income tax expense

(30% × $251,000)

($75,300)

Net income

$175,700

One of the indirect costs of bankruptcy is the effect that a potential bankruptcy has on the firm's decisions. The general result is that:A. the firm will select only all-equity financed projects.B. stockholders expropriate value from bondholders by selecting high-risk projects.C. the firm will always select the lowest-risk project available.D. bondholders expropriate value from stockholders by selecting high-risk projects.E. the firm will rank all projects and select the project which results in the highest expected firm value.

Answers

Answer: B. stockholders expropriate value from bondholders by selecting high-risk projects.

Explanation:

Bankruptcy simply means when an individual or business cannot pay back the funds that is owed to the creditor. When bankruptcy is declared by a particular business, the assets for the business are used in paying back the debt.

One of the indirect costs of bankruptcy is the effect that a potential bankruptcy has on the firm's decisions. The general result is that stockholders expropriate value from bondholders by selecting high-risk projects.

Therefore, option B is the answer.

The manager of a fashionable restaurant open Wednesday through Saturday says that the restaurant does about 26 percent of its business on Friday night, 34 percent on Saturday night, and 24 percent on Thursday night. What seasonal relatives would describe this situation?

Answers

Answer: See Explanation

Explanation:

The work done for each day is written below:

Thursday night = 24%

Friday night = 26%

Saturday night = 34%

Wednesday night = 100% - (24% + 26% + 34%) = 100% - 84% = 16%

Let's assume that sales in a week is represented by x. Therefore average sales in week if x = 1 will be 1/4 = 0.25.

Seasonal relative will be:

= Sales in a day /Average sales in a week

Wednesday = 16% / 0.25 = 0.16 / 0.25 = 0.64

Thursday = 24% / 0.25 = 0.96

Friday = 26% / 0.25 = 1.04

Saturday = 34% / .25 = 1.36

Acme Company has variable costs equal to 40% of sales. The company is considering a proposal that will increase sales by $15,000 and total fixed costs by $9,000. By what amount will net income increase?
a. $6,000
b. $9,000
c. $3,000
d. $0

Answers

Answer: C

Explanation:

If a company increases its prices from $2 to $2.20, and its sales fall from 5 million units to 4.5 million units, using the midpoint method, what is the price elasticity of demand for this market?

a. 1
b. 1.5
c. 2
d. 0.5

Answers

Answer:

-1.10526

Explanation:

The computation of the price elasticity of demand is shown below:

Price elasticity of demand is

= (Change in quantity demanded ÷ average of quantity demanded) ÷ (Change in price ÷ average of price)

where,

q1 = 5

q2 = 4.5

p1 = $2

p2 = $2.2

So,

= {(4.5 - 5) ÷ (4.5 + 5) ÷ 2}  ÷  {(2.2 - 2) ÷ (2.2 + 2) ÷ 2 }

= {-0.5 ÷ 4.75 } ÷ {0.2 ÷ 2.1 }

= -0.10526 ÷ 0.0952

= -1.10526

Credit card balances are not considered to be money primarily because they: Multiple Choice are an asset used in making transactions. are rarely used to make purchases. are not part of people's wealth. do not represent an obligation to pay someone else.

Answers

Answer:

are not part of people's wealth.

Explanation:

Your credit card balance is basically how much you owe your credit card company or how much of your credit line you already used. Credit card balances do not increase individuals' wealth, they actually decrease it. Credit cards are short terms loans given by banks, i.e. liabilities.

The allowance method that assumes a given percent of a company’s credit sales for the period is uncollectible is:___________.
a. The percent of sales method.
b. The percent of accounts receivable method.
c. The aging of accounts receivable method.
d. Direct write-off method.
e. Factoring method.

Answers

Answer:

Option A

Explanation:

In simple words, The percentage of sales method can be defined as the financial forecasting model under which all financial line items such as cost of goods sold, stock levels, and funds are expressed in the form of percentage of total sales made from a company's accounts. The analyst then used those projected sales to estimate he future values of those items.

The allowance method with the  assumption that a given percent of a company’s credit sales for the period is uncollectible is:  The percent of sales method.

The percent of sales method serves as financial forecasting model whereby financial line items such as costs of goods sold as well as inventory, and cash are been  calculated as a percentage of sales.

It usually use the assumption that particular percent of credit sales in that particular period is uncollectible .

Therefore, option A is correct.

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Keith Company paid Major Company for merchandise with an $8,000, 60-day, 9% note dated April 1. If Keith Company pays the note at maturity, what entry should Major make at that time?a. cash 8,720 720 interest income 8,000 notes receivable b. notes payable 8,000 720interest expense 8,720 cashc.cash 8,120 interest income 120 notes receivable 8,000 d. notes payable 7,880 interest expense 120 cash 8,000

Answers

Answer:

c.Dr Cash 8,120

Cr Interest income 120

Cr Notes receivable 8,000

Explanation:

Based on the information we were told that the Company paid another company which is Major Company for merchandise with an amount of $8,000 which includes 60-day as well as 9% note dated April 1 which means that if Keith Company pays the note at maturity the journal entry that Major should make at that time will be:

Dr Cash 8,120

(8,000+120)

Cr Interest income 120 (8,000*9%/360*60)

Cr Notes receivable 8,000

Susan Pinsky's checking account had a balance of $137.66. She wrote a check for $23.62 on September 3. On September 7, the bank made an automatic transfer (AT) of $25.41 to pay her phone bill. She made a deposit of $146.24 on September 12. What is the new balance Pinsky's account?

Answers

Answer:

$234.87

Explanation:

Pinky's new balance will be the opening balance plus additional. Deposits minus withdrawals. The new balance will be the starting balance plus cash-in minus the cash-out.

Starting balance =$137.66

Cash-in:  $146.24

Cash-out :  check $23.62 + (AT) of $25.41 =$49.03

New balance = $137.66 + $146.24 - $49.03

=$283.9- 49.03

=$234.8

Your firm has a debt-equity ratio of .75. Your pre-tax cost of debt is 8.5% and your required return on assets is 15%. What is your cost of equity if you ignore taxes? (Use MM Prop II, No Tax).
A. 11.25%
B. 12.21%
C. 16.67%
D. 19.88%
E. 21.38%

Answers

Answer:

D. 19.88%

Explanation:

The computation of the cost of equity is shown below:

Cost of equity = Return on assets + Debt equity ratio × (Return on assets -pre tax cost of debt)

= 0.15 + 0.75 × (0.15  - 0.085)

= 0.19875 or 19.88%

Hence, the correct option is D. 19.88%

We simply applied the above formula so that the correct value could come

And, the same is to be considered  

pls help!!! will give brainly!!!
Emma is a biomedical engineer who designs robots that perform intricate surgeries. Into which two career clusters that we have considered so far could Emma’s job fall? Give a reason for your choices.

Answers

Answer:

I believe this would be in the Engineering and technology pathway.

Explanation:

Examples of someone in a engineering and technology pathway are people like Biomedical engineers so it makes sense!

A perfectly competitive industry consists of many identical firms, each with a long-run average total cost of LATC = 800 – 10Q + 0.1Q2 and long-run marginal cost of LMC = 800 – 20Q + 0.3Q2. In long-run equilibrium, each firm produces a quantity of ____. 50 40 30 60

Answers

Answer:

50

Explanation:

According to the question, The computation of the quantity produce is shown below:

Here we use the differentiation LRAC to zero

[tex]\frac{\partial LRATC}{\partial Q}=-10+0.2Q=0\\\\ 0.2Q=10\\\\ Q=50[/tex]

From above calculation it can be concluded that the each firm would be produced the quantity of long run equilibrium for 50

Hence, the first option is correct

Which sentences explain the limitations of financial statements?
Financial Statements – Limitations
The business’s balance sheet, income statement, cash flow statement, and statement of retained earnings are some of the important financial statements. Financial statements are used for comparisons of the performance of companies belonging to similar industries. Estimates used for calculating financial statements are subjective as they involve management’s foresight to arrive at different values. Historical data is most commonly used to measure assets. The opportunity cost of using the assets are not taken into account while preparing financial statements.

Answers

Answer: Limitations

The business’s balance sheet, income statement, cash flow statement, and statement of retained earnings are some of the important financial statements.

Explanation:

The limitations of financial statements are "Estimates used for calculating financial statements are subjective as they involve management’s foresight to arrive at different values."

Financial statements are written documents that communicate an entity's business activity and financial performance.

As a snapshot in time, the balance sheet gives an overview of assets, liabilities, and shareholders' equity.

Because the statements are susceptible to interpretation, investors frequently get dramatically different conclusions about a company's financial success.

Therefore, the correct option is "Estimates for financial statements are subjective since they rely on management's foresight to arrive at varied values."

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what is the second largest country in the world ?
1.russia
2.china
3.canada​

Answers

Answer:Canada

Explanation:

Canada, this country is 9,984,670 kilometers squared.

Based on the following information, calculate the cost of goods sold and ending inventory using FIFO, LIFO, and weighted average assuming a perpetual inventory system is in place.
Beginning Balance - 90 units at $11
March 3 - Purchase 300 units for $15
April 4 - Sell 240 units for $28
June 30 - Purchase 250 units for $18
August 16 - Sell 180 units for $30

Answers

Answer:

Cost of Sales :

FIFO = $ 6,030

LIFO = $6,840

Weighted Average = $6,354.60

Ending Inventory :

FIFO =  $4,176

LIFO = $3,150

Weighted Average = $3,636.60

Explanation:

FIFO

This method assumes that the first inventory purchased will be the first to be sold

Cost of Goods Sold :

90 units × $11   =  $990

150 units × $15 = $2,250

150 units × $15 = $2,250

30 units × $18  = $540

Total                 = $ 6,030

Ending Inventory :

232 units × $18 = $4,176

LIFO

This method assumes that the last inventory purchased, will be the last to be sold

Cost of Sales :

240 units × $15 =  $3,600

180 units × $18 =  $3,240

Total = $6,840

Ending Inventory :

90 units × $11  = $ 990

60 units × $15 = $ 900

70 units × $18 = $ 1,260

Total = $3,150

Weighted Average

A new average cost per unit is calculated with every purchase made.

New Average Cost = (90 units × $11 + 300 units × $15) ÷ 390 units

                                = $14.08

Cost of Sale , April 4 =  240 units × $14.08

                                  =   $3,379.20

New Average Cost = (150 units × $14.08 + 250 units × $18.00) ÷ 400 units

                               = $16.53

Cost of Sale, Aug 16 = 180 units × $16.53

                                  = $2,975.40

Total Cost of Sales =  $3,379.20 + $2,975.40

                                = $6,354.60

Ending Inventory = 220 units × $16.53

                             = $3,636.60

If the growth rate of the money supply is 8%, velocity is constant, and real GDP grows at 4% per year on average, then the inflation rate will be _____%.If the growth rate of the money supply increases to 13%, velocity is constant, and real GDP grows at 2% per year on average, then the inflation rate will be _____%.If the growth rate of the money supply increases to 13%, velocity grows at 11%, and real GDP grows at 2% per year on average, then the inflation rate will be ______%.

Answers

Answer:

Explanation:

The formula to solve the question is:

∆M + ∆V = ∆P + ∆Y

where,

∆M = relation among money growth

∆V = changes in money velocity

P = change in prices

∆Y = change in real GDP

1. For question 1,

∆M = 8%, ∆V = 0, ∆Y = 4

∆M + ∆V = ∆P + ∆Y

8% + 0 = ∆P + 4%

∆P = 8% - 4%

Inflation rate = 4%

2. ∆M = 13%, ∆V = 0, ∆Y = 2%

∆M + ∆V = ∆P + ∆Y

13% + 0 = ∆P + 2%

∆P = 13% - 2%

∆P = 11%

Inflation rate = 11%

3. ∆M = 13, ∆V = 11, ∆Y = 2

∆M + ∆V = ∆P + ∆Y

13% + 11% = ∆P + 2%

∆P = 13% + 11% - 2%

∆P = 22%

Inflation rate = 22%

Delph Company uses a job-order costing system and has two manufacturing departments—Molding and Fabrication. The company provided the following estimates at the beginning of the year:
Molding Fabrication Total
Machine-hours 23,000 33,000 56,000
Fixed manufacturing overhead costs $790,000 $200,000
$990,000
Variable manufacturing overhead cost per machine-hour $5.60 $5.60
During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobs—Job D-70 and Job C-200. It provided the following information related to those two jobs:
Job D-70: Molding Fabrication Total
Direct materials cost $ 371,000 $ 328,000 $ 699,000
Direct labor cost $ 240,000 $ 160,000 $ 400,000
Machine-hours 16,000 7,000 23,000
Job C-200: Molding Fabrication Total
Direct materials cost $ 290,000 $ 210,000 $ 500,000
Direct labor cost $ 100,000 $ 240,000 $ 340,000
Machine-hours 7,000 26,000 33,000
Delph had no underapplied or overapplied manufacturing overhead during the year.
Required:
1. Assume Delph uses a plantwide predetermined overhead rate based on machine-hours.
a. Compute the plantwide predetermined overhead rate.
b. Compute the total manufacturing cost assigned to Job D-70 and Job C-200.
c. If Delph establishes bid prices that are 150% of total manufacturing cost, what bid prices would it have established for Job D-70 and Job C-200?
d. What is Delph's cost of goods sold for the year?

Answers

Answer:

Delph Company

a) Plantwide predetermined overhead rate = $17.68

b) The total manufacturing cost assigned to:

                                                  Job D-70     Job C-200

Direct materials cost              $ 699,000     $ 500,000

Direct labor cost                        400,000        340,000

Manufacturing overhead           720,789         582,811

Total manufacturing cost    $ 1,819,789   $ 1,422,811

c) Bid Prices:

                                                           Job D-70        Job C-200

150% of total manufacturing cost  $2,729,683.50  $2,134,216.50

d) Cost of goods sold:

Job D-70           $ 1,819,789

Job C-200          $ 1,422,811

Total                 $3,242,600

Explanation:

a) Data and Calculations:

                                                                 Molding     Fabrication     Total

Machine-hours                                          23,000        33,000        56,000

Fixed manufacturing overhead costs $790,000   $200,000    $990,000

Variable overhead cost per machine-hour $5.60       $5.60

                                                                 Molding     Fabrication     Total

Job D-70

Direct materials cost                           $ 371,000  $ 328,000   $ 699,000

Direct labor cost                                $ 240,000   $ 160,000   $ 400,000

Machine-hours                                         16,000          7,000        23,000

Job C-200

Direct materials cost                       $ 290,000    $ 210,000  $ 500,000

Direct labor cost                              $ 100,000    $ 240,000  $ 340,000

Machine-hours                                       7,000          26,000       33,000

Plantwide predetermined overhead rate based on machine-hours:

= $990,000/56,000

= $17.68

Manufacturing overhead costs:

                                                                 Molding     Fabrication     Total

Fixed manufacturing overhead costs $790,000   $200,000     $990,000

Variable manufacturing overhead         128,800       184,800        313,600

Total manufacturing overhead costs  $918,800    $384,800  $1,303,600

Overhead rate

Molding = $39.9478 ($918,800/23,000)

Fabrication = $11.6606  ($384,800/33,000)

Assignment of manufacturing overhead:

                      Job D-70     Job C-200

Molding       $639,165        $279,635

Fabrication      81,624            303,176

Total           $720,789          $582,811    

Revenues, Expenses, and Cost of Goods Sold are closed to which of the following accounts:_________
A) Income Summary
B) Retained Earnings
C) Other Income
D) Dividends
E) None of the Above

Answers

Answer: A) Income Summary

Explanation:

The Income Summary account is used to compile temporary accounts before posting them to capital accounts. Revenues, Expenses and Cost of Goods are temporary accounts which will be compiled in the Income summary account.

The Income summary account has a debit and a credit side with income going on the credit side and expenses going on the debit side. If the credit side is higher than the debit side then profits have been made. The reverse is true.

what is business ?please explain about it​

Answers

Answer: business can be defined as an organization dedicated to do commercial and professional activities.

Explanation:

The word business can also be defined as the activities and efforts that a person makes in order to produce money. To do this, the person creates products or sells services to obtain a reward.

Currently, many people are taking the line of entrepreneurship, where they put their own businesses and become their bosses. They themselves develop their model of how they are going to distribute and market the products or services they have so that they reach the population.

The business is something that comes from ancient times. Barter was a way of doing business since if a person was interested in something that another had, they proceeded to make an exchange.

A Reuter's article on March 14, 2012 reported that Somali pirates had decided to cut their ransom demands so as to avoid costly hostage maintenance and increase flow rate. The article says that on average the pirates were holding 30 ships hostage, and each ship was held for 150 days.How many ships on average are the pirates capturing each month? (Assume a month is 30 days)- 10 ships per month- 30 ships per month- 6 ships per month- 1/5 ships per month

Answers

Answer:

6 ships per month

Explanation:

30 ships are held for 150 days

[tex]30\ \text{ships}=150\ \text{days}[/tex]

[tex]1\ \text{day}=\dfrac{30}{150}\ \text{ships}[/tex]

[tex]1\ \text{day}=\dfrac{1}{5}\ \text{ships}[/tex]

[tex]30\ \text{days}=30\times \dfrac{1}{5}\ \text{ships}[/tex]

[tex]30\ \text{days}=6\ \text{ships}[/tex]

So, in a month 6 ships are captured.

What are the annual social security withholding for an executive whose annual gross earnings are $98,485?

Answers

Answer:

$6,106.07

Explanation:

Calculation for the annual Social security withholding

Based on the information given the annual gross earnings are the amount of $98,485 which is lower than the taxable maximum of the amount of $137,700 in 2020 as well as the amount of $142,800 in 2021 which means that the annual social security withholding will be :

Using this formula

Annual Social security withholding =6.2%*Annual gross earnings that is subject to a taxable maximum

Let plug in the formula

Annual Social security withholding= 6.2%*$98,485

Annual Social security withholding= $6,106.07

Therefore the Annual Social security withholding will be $6,106.07

Using email for ____ purposes has many benefits, including low cost, immediate communication, interactivity, and the ability to contact multiple customers.

Answers

Answer: a. marketing

Explanation:

Using email for marketing purposes has become a very effective method of advertising since the advent of the internet and subsequently email services. It is quite low cost and yet has a wide coverage.

It also enables immediate communication that can be quite interactive thereby ensuring that customers can be personally catered for. It also allows for creativity in marketing as a multitude of methods can be used ranging from newsletters to posters.

C. Goode Eyeglasses overstated its inventory by $30,000 at the end of 2021. If the error is not discovered until 2023, before adjusting or closing entries, C. Goode would need:_______
A) A prospective achjustment in the 2022 income statement
B) An increase in 2023 retained comings
C) A debit to inventory of $30,000 in 2023
D) None of these answer choices are correct

Answers

Answer:

D) None of these answer choices are correct

Explanation:

As C. Goode Eyeglasses company overstated its inventory in year end 2021:

Its closing stock of 2021 is overvalued by $30,000.

Its opening stock of 2022 is also overvalued by $30,000.

This error will not impact 2023. Therefore, C. Goode Eyeglasses company will not adjust this error.  Hence,  Option 'd' is correct and rest all are incorrect.

Hudson Corporation will pay a dividend of $2.78 per share next year. The company pledges to increase its dividend by 4.5 percent per year indefinitely. If you require a return of 15 percent on your investment, how much will you pay for the company’s stock today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answers

Answer:

You need to pay $26.47. The further explanation is given below.

Explanation:

The given values are:

Dividend

[tex]D_1 = $2.78\ per share[/tex]

Required rate of return

[tex]k_e = 0.15[/tex]

Dividend's growth rate

[tex]g = 0.045[/tex]

Now,

The stock price will be:

= [tex]\frac{2.78}{0.15-0.045}[/tex]

= [tex]\frac{2.78}{0.105}[/tex]

= [tex]26.47[/tex]

If the total cost of 3 units is $40 and the total cost of 4 units is $50, the marginal cost of the fourth unit is:

Answers

Answer:

$10

Explanation:

Calculation for the marginal cost of fourth unit

Using this formula

Marginal cost = Change in Total cost / Change in number of units

Let plug in the formula

Marginal cost of fourth unit = $(50 - 40) / (4 - 3)

Marginal cost of fourth unit= $10 / 1

Marginal cost of fourth unit= $10

Therefore Marginal cost of fourth unit will be $10

A manufacturing company incurs direct materials costs of $6 per unit. The total direct materials cost is______when the company manufactures 2,000 units.

Answers

Answer:

$12,000

Explanation:

The manufacturing company has a direct materials cost of $6

The company manufactures 2,000 unit

Therefore total direct material cost can be calculated as follows

= 2,000×6

= $12,000

Hence the total direct material cost of $12,000

Walters manufactures a specialty food product that can currently be sold for $21.90 per unit and has 19,900 units on hand. Alternatively, it can be further processed at a cost of $11,900 and converted into 11,900 units of Deluxe and 5,900 units of Super. The selling price of Deluxe and Super are $31.10 and $19.90, respectively. The incremental income of processing further would be:_______.
a. $39,790.
b· $51,690.
c· $17,900.
d· $43,900.
e· $11,900.

Answers

Answer:

a. $39,790.

Explanation:

The computation of the incremental income of processing further is shown below:

Sales - Deluxe - 11,900 Units × $31.10            $370,090  

Sales - Super - 5,900 Units × $19.90            $117,410  

Total Sales                                                      $487,500  (a)

Further Processing Costs                              $11,900  

Sale Price of speciality Food                         $435,810        

19,900 Units × $21.90

Total                                                                $447,710  (b)

Net Incremental Income                               $39,790 (a - b)

Hence, the correct option is a.

Jennifer Creek is saving up for a new car. She wants to finance no more than $10,000 of the $26,000 estimated price in two years. She deposits $5,000 into a savings account now and will make monthly deposits for the next two years. If the savings account pays a nominal interest rate of 3% per year with monthly compounding, how much must she deposit each month?

Answers

Answer: $432.74

Explanation:

Since Jennifer wants to buy the car in the next two years and the car cost is $26000 and she wants to finance no more than $10,000, therefore she'll require ($26000 - $10000) = $16000.

In order for her to get $16000 for the next two years, she wants to deposit $5000 today and she'll make a month deposit which can be represented by A every month. The interest rate will be calculated as: 3%/12 = 0.03/12 = 0.0025 = 0.25% every month.

Therefore, the amount that she must deposit each month will be:

$5000(F/P,0.25%,24) + A(F/A, 0.25%, 24) = $16000

$5000(1.062) + A(24.703) = $16000

$5310 + 24.703A = $16000

24.703A = $16000 - $5310

24.703A = $10690

A = $10690/24.703

A = $432.74

The amount that she must deposit each month will be $432.74

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