Dragan wishes to purchase a new car, in 4 years time, which currently sells for $35000. He has found an account paying 3.8% p.a. compounded monthly.

a.

Use the graphics calculator to calculate the amount Dragan needs to deposit into his account each month, assuming the car will cost the same amount in 4 years' time.

Calculator input:

=n=

Answer

=i=

Answer

=PV=

Answer

=PMT=

Answer

=FV=

Answer

/=P/Y=

Answer

/=C/Y=

Answer

Therefore, Dragan needs to put $ Answer into this account every month.

b.

Inflation is currently running at 3% pa. What would be the expected price of the car due to inflation in 4 years time?

Inflation =

$ Answer

c.

What should Dragan pay into his account to save for the expected price of the car due to inflation?

=n=

Answer

=i=

Answer

=PV=

Answer

=PMT=

Answer

=FV=

Answer

/=P/Y=

Answer

/=C/Y=

Answer

Therefore, Dragan needs to put $ Answer into this account every month.

Dragan's situation has changed and needs a car immediately. He will take out a loan from a bank with an interest rate of 16.2%p.a., compounded monthly over 5 years

d.

Dragan has saved $3000 for the car. How much money will he need to borrow from the bank?

Amount borrowed =

$ Answer

e.

What will Dragan's monthly repayments be?

Monthly Repayments =

$ Answer

After one year, Dragan has a pay rise and can now afford to increase his monthly repayments to $900, but the interest rate has also increased to 14.2%p.a. compounding monthly.

f.

How much is the outstanding debt after 12 months?

The outstanding debt is

$ Answer

g.

How long (in months) will it take for Dragan to pay his outstanding debt, by making monthly repayments of $900 with an interest rate of 14.2%p.a. compounding monthly?

Number of months to pay off the debt=

$ Answer