Question 3 John wants to start saving funds to put toward a car purchase 5 years from today. The car costs $22,000 today, and he expects the price to grow at 2.25% per year. John discovered that a local bank offers a savings account that pays an interest rate of 4.50% per year. He plans to make 4 contributions of $2,000 each year to the savings account; the first contribution will be made 1 year from today, and the final contribution will be made 5 years from today. He will use the funds in the account at that time as a down payment for the car, financing the remaining balance through the car dealer. John expects the dealer to offer the following terms for financing: 5 equal yearly payments at an annual interest rate of 6.50%, with the first payment due 1 year after he takes possession of the car. a) How much will the car cost 5 years from today? Solve using an equation or Excel function. b) How much will John have saved in 5 years? Solve using an equation or Excel function. c) How much will John need to finance through the dealer? (i.e., With his savings, how much more does John need to buy the car?) d) What will be the amount of his yearly payment to the dealer? Solve this part of the problem using a table. B C D Saving for a car 1 2 Car price today 3 Price growth per year 4 Annual savings 5 Savings period (years) 6 Savings interest rate 7 Dealer's loan period (years) 8 Dealer's loan rate 9 10 a) Car future price 12 13 b) Future value of savings 15 16 c) Amount required to finance through dealer 17 20 d) Yearly payment to dealer (using table) 21 Note: You may not need to fill in every row to solve the problem. 22 23 24 25 26 27 28 29 30 31 32 Year Beginning loan balance Interest accrued during year Payment Ending loan balance