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Susie has decided to save up for a trip to Europe

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Question;(a) Susie has decided to save up for;a trip to Europe after graduation. She has three years to save the money and she will be putting her money in an account where it will earn 4% annual interest compounded monthly. She will make regular monthly deposits at the end of each month. Susie estimates that her trip to Europe will cost a total of $6000.;(i) How much must she deposit each month to reach this $6000 goal in 3 years?;(ii) How much total money will Susie deposit over the entire duration of this investment?;(b) Susie's friend Margaret did not save up for the trip. Instead, she took out;a personal loan from her bank after graduating. She borrowed $6000 at 10:4% annual interest compounded monthly, which she must pay back in monthly installments;over the course of three years.;(i) How much will her monthly payment be?;(ii) How much total money will Margaret pay over the entire duration of this loan? Compare your answer to Susie's total cost in part (a) to see why planning ahead pays off?

 

Paper#60429 | Written in 18-Jul-2015

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