1. Replace Car in 5 Years:

Today's price of the car you want is $20,000 but in 5 years (with 2% annual inflation) the cost will be (a) .

Assume that in 5 years the trade-in value of your existing car will be $4,000. This means that the amount you need to save in the next 5 years is (b) .

Assuming that the rate of return is 4% on money you're saving for your car, find the following:

If you were to invest one lump sum now (that will grow to (b)) and interest is compounded annually, the lump sum you need to invest now is (c) ______.

If you are going to set aside the same amount each month (that will grow to (b)) and interest is compounded monthly, your monthly payment needs to be (d) .

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1. Down Payment for a $300,000 condo in 3 years:

Assume you need a 5% down payment for a FHA loan. Your needed down payment will be (a) _____________.

Assume that the rate of return you can earn is 2% in your basic savings account, find the

following figures:

How much would you need to save monthly in order to have a down payment in 36 months? (b) ___________.

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1. Calculating Retirement:

Jim, age 40, realizes he needs $800,000 to retire on (in addition to his company's pension and social security benefits). He thinks he can earn 10% return. He wishes to retire at age 65. How much should he start his putting into a monthly savings plan? (a)

If Jim starts saving the same amount per year 10 years earlier, at age (b) _______, he would

have earned (c) _______________.

So, beginning to save 10 years earlier would have earned Jim how much more money in retirement? (d) .

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1. College Savings

Today's cost for a good college education including room, food and books runs approximately $100,000. If you have two kids ages 2 and 4, how much will college be, assuming 2% inflation in 16 years? (a) __________. In 14 years? (b) _________.

If you can earn 10% on your savings, how much should you save each month?

(c) for the 2 year old? ___________ For the 4 year old? .

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