1. Help Dan and Marlo calculate the total monthly cost of the cars they are looking at by completing the table and then answering the following questions.
2. Which vehicle should they purchase if they're interested only in the lowest monthly loan payment?
3. What should they choose if they're interested in buying something that has the lowest total monthly cost?
4. If they are interested in a vehicle with the lowest overall cost of ownership which one should they choose?

Complete the following table. Show all work for partial credit.

Car 1 Car 2 Car 3 Car 4 Car 5

Type 4 door sedan 2 door luxury coupe 4 door luxury sedan SUV Luxury SUV

Cost $29,000 $43,000 $45,000 $34,000 $42,000

Loan Interest rate 1.9% 3.4% 0.00% 1.9% 3.5%

Length of loan (yrs) 3 5 6 5 7

Monthly Ins $125 $170 $175 $145 $155

Monthly gas $95 $150 $165 $190 $210

Monthly Pymt

Total monthly expense

Total of all payments

Overall cost of ownership

10 points (Chapt 7)

1. Neil recently graduated from college. He's employed by a space exploration company and makes approximately $65,000 per year. His primary goal is to begin savings for an emergency fund. After looking at his budget, Neil has determined that in the case of a severe emergency he will need to replace 45% of his annual income. This is a conservative estimate, but Neil believes the amount should be sufficient to pay his rent, car payment, food, utility, and insurance expenses.
2. How much income does Neal believe he needs in the case of a severe emergency?
3. After discussing his alternatives with you, Neil assumes that he can meet all his necessary expenses with as little as $29,000 per year. His goals to establish a six-month emergency fund, how much should he have on hand today? What will he need if he has a three-month emergency fund goal?
4. If Neil can save $300 per month toward his emergency fund goal, how long will it take him to obtain 3 and six months of needed expenses, assuming he can earn a 2% rate of return on his savings?
5. What type of assets would be appropriate for his emergency fund?
6. Today Neil has few assets that he can use to pay emergency expenses. Until he saves enough for an emergency fund, what other options does he have for funding a potential emergency?