Question 1 (based on Week 1 Excel Examples - Chapters 1-4)

You are considering purchasing a car in 4 years, anticipating a purchase price of $40,000. (Note: This

question doesn't require a written answer, but you need to clearly indicate your answers to parts a, b,

and c.)

a. How much do you need to deposit in an account today, if you want to have $40,000 in the

account in 4 years, assuming the account earns 5% annual interest rate? (assume annual

compounding)

b. If you deposit $30,000 in the account today, what rate of interest would you need to earn

annually in order to have exactly $40,000 in the account in 4 years? (assume annual

compounding)

c. If your account earns 0.25% of interest every month, and if you make an initial deposit of

$10,000 today, how much do you need to deposit every month in your account in order to have

exactly $40,000 in 4 years? (assume monthly compounding)