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.

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?

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?

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?

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