Question

Suppose the sticker price on a particular car was​ 17,090. A consumer expects to qualify for a rebate of​ $4,500 and receive an additional​ $3,500 for trading in his current car. Six years ago the consumer invested​ $7,500 in a savings account earning​ 2% APR compounded monthly. To the nearest dollar how much would the consumer have saved to purchase the​ car?

Answer 1

$8455

Explanation:

Sticker price = $17090

APR = 2% = 0.02

p= $7500

n= 6 years = 6*12 = 72 months

Net cost of the car = 17090 - 4500 - 3500

= $9090

F = p(1+r)^n

F = future value

P= present Value

r = rate

n = number of period

r = 0.02 per year = 0.02/12 per month

F = 7500(1 + 0.02/12)^72

F = 8455.38

F = $8455 (to the nearest dollar)

Since the car costs $9090, the customer is shot by 9090 - 8455

= $635