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)