2. Annuities and Inflation. It is 2005 and you are choosing between two new cars: a...
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2. Annuities and Inflation. It is 2005 and you are choosing between two new cars: a 2005 Acura TSX and a 2005 BMW 325xi. The Acura costs $28,000 and can be financed at an APR of 4.00% with monthly compounding over 60 months. The BMW costs $34,000 and can be financed at an APR of 5.00% with monthly compounding over 60 months. You decide to buy the Acura and invest the monthly savings in your retirement account for the next 60 months. Your retirement account pays an APR of 7.00%, compounded monthly, and the expected monthly inflation rate is 0.25%. (a) How much more money will you have in your retirement account in 30 years as a result of buying the Acura? Assume your first payment is next month. (b) What is the value of the additional retirement savings measured in today's dollars? 2. Annuities and Inflation. It is 2005 and you are choosing between two new cars: a 2005 Acura TSX and a 2005 BMW 325xi. The Acura costs $28,000 and can be financed at an APR of 4.00% with monthly compounding over 60 months. The BMW costs $34,000 and can be financed at an APR of 5.00% with monthly compounding over 60 months. You decide to buy the Acura and invest the monthly savings in your retirement account for the next 60 months. Your retirement account pays an APR of 7.00%, compounded monthly, and the expected monthly inflation rate is 0.25%. (a) How much more money will you have in your retirement account in 30 years as a result of buying the Acura? Assume your first payment is next month. (b) What is the value of the additional retirement savings measured in today's dollars?
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Related Book For
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Posted Date:
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