Saving for a Car In January 2010, a new Honda Accord EX with manual transmission was

Chapter 6, Problem 49

(choose chapter or problem)

Saving for a Car In January 2010, a new Honda Accord EX with manual transmission was listed at $23,830. (a) Assuming a constant annual inflation rate of 3.23%, which was the annual percent increase in the U.S. Consumer Price Index for 2006, calculate a projection of what a new Honda Accord EX with manual transmission would cost in January 2014. (b) If the sales tax where you plan to purchase this vehicle in January 2014 is 9.25%, what is the final cost of the Honda ? (c) Beginning in January 2010, suppose that you make a monthly payment into a sinking fund that earns interest at a 2.75% annual rate, compounded monthly, in order to accumulate funds to purchase the new Honda in 4 years. What monthly payment will produce a balance in this sinking fund in January 2014 that equals the projected final cost of the 2014 Honda Accord EX? Source: American Honda Motor Co., Inc.; and U.S. Department of Labor, Bureau of Labor Statistics