Here is my other attempt at this:
- After the CD, I have $2846.07
So when I purchase the car, I have $10,000-$2846.07 = $7,153.93 left to pay off.
-According to the wording of the problem, I assume I will be depositing $100 monthly for 3 years.
So for 3 years I will make the total payment of: $100 x 12 months x 3 years = $3,600
-But the (assumed annual) year interest for the $7,153.93 is at 4.2%
So after 3 years it will be: $7153.93(1.042)^3= $8093.71
Subtract it from the total payment, I have $8093.71 - 3600 = $4493.71 left to pay off.
-So now how much I need to deposit monthly into an annuity for the next 24 months to obtain the $4493.73? I can earn 5% interest compounded monthly with this annuity.
-I'm not sure what it means by "I can earn 5% interest compounded monthly with the annuity"
-Hit the wall.