Cindy and Jack have always practiced good financial habits, in particular, developing and living by a budget. They are currently in hase a new car and have budgeted $300 per month for car payments.
le visiting a local dealership, a salesman, Scott, shows them a car that meets their financial requirements. Then he insists that they look at a much
that he knows they would prefer. The more expensive car would result in payments of $500 per month.
scussing the two cars, Cindy and Jack tell Scott that the only way they can afford a more expensive car would be to discontinue making a $200 m
cribution to their retirement plan, which they have just begun. They plan to retire in 30 years. Scott explains that they would only need to discontinu
thly payments for five years, that is, the length of the car loan. Scott calculates that the $12,000 in lost contributions over the next five years could
remaining 25 years by increasing their monthly contribution by only $40 per month, and they would still be able to achieve their goal.
omment on the ethics of a salesperson who attempts to talk customers into spending more than they had originally planned and budgeted.
Scott correct in his calculation that Cindy and Jack can make up the difference in their retirement by increasing their monthly contributions by onl
the remaining 25 years? (Note: Assume an annual rate of return of 6% on Cindy and Jack's investment and assume that hey make investments ar