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Interest rate compounded monthly for saving account
Course:- Business Economics
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Enrico Suarez just graduated with a B.S.in engineering and landed a new job with a starting annual salary of 48,000.there are number of things that he would like to do with his new found ”wealth”. For starters, he needs to begin repaying his student loans (totaling $20,000) and he’d like to reduce some outstanding balances on credit cards (totaling $5,000). Enrico also needs to purchase a car to get to work and would like to put money aside to purchase a condo in the future. Last but not least, he wants to put some money aside for his eventual retirement. Our recent graduate needs to do some financial planning for which he has selected a 10 year time frame. At the end of 10 years, he’d like to have paid off his current student loan and credit card debt, as well as have accumulated $40,000 for a down payment on a condo. If possible Enrico would like to put aside 10% of his take home salary for retirement. He has gathered the following information to assist him in his planning.

• Student loans are typically repaid in equal monthly installments over a period of 10 years. The interest rate on Enrico’s loan is 8% compounded monthly.

• Credit cards interest rate 18% compounded monthly (assume the interest rate will not change over 10 years)

• As a first time car buyer Enrico can secure a $15,000 car loan at 9% interest compounded monthly to be repaid on 60 months, to accumulate funds for the replacement of the car, he wants to set aside the same amount each month for the second five years, Insurance for the this car will cost $1200 per year while fuel and maintenance cost will be $100 per month.

• Enrico’s take home pay will be reduced by income taxes and benefits deductions to 80% of his gross income.

• A nice two- bedroom apartment near Enrico’s place of work has monthly rent of $950.00 including utilities.

• Enrico estimated the other monthly expenses as follows:

Food $200

Phone $70

Entertainment $100

Miscellaneous (clothing and household items) $150

• The bank pays 5% interest rate compounded monthly for saving account. As Enrico’s friend (and the one who took Engineering Economics course) you have been asked to check how reasonable are his goals?




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