Question

Mr. Smith Junior wishes to buy a used car in a year's time when he turns 18, and he is willing to spend $5,000. He plans to work part-time and put all his monthly earnings into a bank account that will pay 0.5% interest per month. How much must he earn per month in order to be able to purchase the car in one year's time? The correct answer is $405.33 and not $430.33. How do we get to this?

Answer 1

This will be a additional Price = $282.51 Time  to maturity = 10 years Annual payment = $50 Rate of the Return = 12%   


                                      Hope This helps!