Answer:
It would be wise to invest in an Annuity with monthly payment of $350.
Explanation:
You no longer have a $350 per month car payment; and you used to live well without this $350. So it's the best to use this $350 for an invesment.
Annuity is a financial reserved for retirement. Assuming you will be retired in 10 years. Then you invest in an annuity now with:
current rate: 6% ~ monthly rate 0.5%,
Monthly payment of $350 (PMT)
Tenor: 10 years (NPer = 120)
you will have a future value in 10 years as below:
In excel, FV(rate,Nper,PMT) = FV(0.5%,120.350) = $57,538
Then when you're retired, you invest full $57,538 in an retirement annuity to receive a monthly amount for living expenses. Assuming the key factors as below:
Monthly rate: 0.5%
Tenor: 25 years ~ 300 months
PV: $57,538
The monthly amount to be received is PMT(rate,Nper,PV)= PMT(0.5%.300,$57,538) = $370
You will receive about $370 for 25 years in every month of 25 years in retirement.
