Sue asked for help developing her financial plan. She has an after-tax income of $48,000 and budgets $30,000 for necessary expenses. This leaves $18,000 to spend on debt and savings annually. (Assume all annuity payments are in the form of ordinary annuities.) Part A: Sue has a balance of $20,000 on her credit card with a minimum monthly payment of $500 and an APR of 17.25%. Sue wants to purchase a car and spend $550 a month on payments. She is approved for a 4.50% loan for 36 months. What is the maximum amount she can spend on a car? Part B: Sue wants to save a down payment on a home and hopes to purchase in 5 years. If she wishes to have $20,000 at the end of five years and earns 3.5% annually in her savings account (making equal annual deposits). What amount will her deposits need to be to reach her goal? Sue received $20,000 as an inheritance from her uncle. He stipulated that she save this money for her 2 children's college education. She would like to have $50,000 saved up in 10 years. What annual interest must she earn to reach this goal (she will make no additional deposits to this account)? Part C: Offering Advice Calculate the total annual amount of debt and savings payments Sue has planned in the scenarios above. If she has any of her $18,000 remaining after her credit card, auto loan, and savings are made offer advice on how this should be divided (make more than the minimum payments or make additional deposits to savings). Be sure to offer reasons why she should choose to follow your advice rather than spend the cash.

Part A: Debt
1. How long to pay off credit card debt:
Interest rate	17.25
Payment AMT	500.00
Future Value (Balance)	20,000.00
Number of periods	54.80	Months
Number of years	4.57	Years
2. What is the maximum AMT that can be spent on a car loan, with set monthly PMT AMT:
Monthly PMT	550
Interest rate	4.50%
Term Months	36
Max for spending (FV)	$21,235.69
Part B: Savings
1. How much to save annually for future goal:
Interest rate	3.50%
Periods	5	years
Goal (FV)	20,000.00
Annual Savings AMT	$3,603.50
Monthly Savings AMT	$300.29
2. What annual interest is needed to reach the savings goal:
Present value	20,000.00
Goal AMT (FV)	50,000.00
Periods	10	years
Interest rate	10%