Chris is considering purchasing a new van for Meals Van. He expects to buy the van for $50,000 four years from today. Solve the following using a calculator or spreadsheet.
a. If he can invest money at 5 percent compounded quarterly, how much must he invest today?
b. Suppose that Chris believes that Meals Van can put aside only $37,500 today to buy the new van in 3 years. However, he thinks that he can invest the money at 7.20 percent compounded monthly. Determine if he will have the $50,000 he will need for the new van.
c. Assuming that Chris can put aside $37,000 today and needs to have $50,000 available in 4 years, what interest rate must be earned? Use quarterly compounding.
d. Assume that Chris believes that she can earn only 6 percent per year on the money that Meals Ban invests. Assuming monthly compounding, how much must be put aside today to provide $50,000 in 4 years?