Question
Asked Oct 22, 2019
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Calculate the amount of money that Emily needs to set aside from her bonus this year to cover the down payment on a new car, assuming she can earn 6% on her savings. What if she could earn 10% on her savings?

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Expert Answer

Step 1

We need to use the concept of time value of money to solve the question. According to the concept of time value of money, the value of money available at the present time is more compared to the same sum in some future time. This is because of the earning potential of money, that is, we can earn interest on money by investing.

Step 2

We need to determine the amount that Emily needs to set aside this year (required annual investment) when she can earn 6% on her savings and also  we need to determine the amount when she can earn 10% on her savings.

Step 3

We can use excel to determine the amount that Emily needs to set aside ...

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