Bart Simpson age 10 wants to be able to buy a really cool ne

Bart? Simpson, age 10?, wants to be able to buy a really cool new car when he turns 15. His really cool car costs ?$16 comma 000 ?today, and its cost is expected to increase 4 percent annually. Bart wants to make one deposit today? (he can sell his? mint-condition original Nuclear Boy comic? book) into an account paying 7.2 percent annually in order to buy his car in 5 years. How much will? Bart\'s car? cost, and how much does Bart have to save today in order to buy this car at age 15?? a.??How much will? Bart\'s car cost after 5 ?years? ?$ nothing???(Round to the nearest? cent.) b.??How much does Bart have to save today in order to buy this car at age 15?? ?$ nothing???(Round to the nearest? cent.)

Solution

a. cost of car after 5 years = 16,000 * 1.04^5 = 19,466.45

b. amount to be saved today = 19,466.45/1.072^5 = 13,750.32