Refer to the following in doing Exercises 73–75. In the savings formula, the interest rate appears twice. The particular ways in which is involved make it impossible to solve it algebraically to get an explicit formula for . However, with the help of a spreadsheet, you can find approximately when the other quantities are given.
73. (Spreadsheet helpful) Suppose that you decide to lease a new car. (Leasing is cheaper than buying, because over the lease period you pay only about half the cost of buying the car.) At the end of a 48-month lease period, you either return the car or else make a lump-sum payment of $10,000 if you want to keep the car. You decide to save up, just in case you decide to keep the car; if you don’t keep this car, you will still have a down payment for a new leased or purchased car. You feel comfortable with saving $140/month (over and above your lease payments). How high an annual nominal interest rate on savings do you need to accumulate $10,000 in 48 months, with interest compounded monthly?
73.
1.60% per month, or 19.2% annual rate