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Problem 2 You want to purchase a new car 5 years from today....

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Finance

Problem 2
You want to purchase a new car 5 years from today. The car you wish to purchase costs $30,000 today, and your research indicates that its
price will increase by 2% to 4% per year over the next 5 years.
a. Estimate the price of the car in 5 years if inflation is (1)2% per year and (2)4% per year.
b. How much more expensive will the car be if the rate of inflation is 4% rather than 2%?
c. Estimate the price of the car if inflation is 2% for the next 2 years and 4% for 3 years after that.
Answers (insert your answers in the highlighted cells; use cell references, equations, and functions wherever possible)
a.
Cost today
Inflation rate
Number of years
Future value
b. Difference
c.
Cost today
Inflation rate
Number of years
Future value in 2 years
Cost in 2 years
Inflation rate
Number of years
Future value in 5 years
4% inflation
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