**Scenario:**

George and Martha have $6,000 in a checking account that pays no interest. They want to buy their first car now and save monthly toward a house. They plan to drive the car for 5 years and sell it the same month they put money down on the house.

**Part 1: Buying the Car**

They have narrowed their choice to two models, one from dealer A and one from dealer B.

- **Car A**
- Price: $26,000
- Down payment: 8%
- APR: 1.5%
- Months to pay: 60
- Resale value: 30%
- Miles/gallon: 35

- **Car B**
- Price: $21,000
- Down payment: 15%
- APR: 2.5%
- Months to pay: 48
- Resale value: 40%
- Miles/gallon: 30

**Operating Costs:**

- Gas: $2.60/gallon, 20,000 miles/year
- Oil changes: $60 every 5,000 miles
- Insurance and licensing: 5% of the full price each year

**Calculate:**

1. Monthly and total (5 years) payments for both car options.
2. Monthly and 5-year operating cost for both car options.
3. Total cost of ownership for each car option over the 5 years.
4. Choose the car you think George and Martha should purchase and explain your choice.

**Part 2: Buying the House**

- The car down payment will come from their bank account, and the remainder will stay in the checking account as a cash reserve.
- After all monthly expenses, George and Martha have a net positive cash flow of $1,400.
- Monthly car, insurance, gas, and oil payments will come from their cash flow of $1,400.
- Excess cash from the $1,400 will go into a long-term savings plan for 5 years that pays an APR of 6%, compounded monthly.
- At the end of the five years, they will sell the car, cash out the long-term savings plan, and use the balance as a down payment on a new house, expected to be 15% of the house’s price.

**Calculate:**

1. Total funds in the long-term savings plan after 5 years.
2. Funds available for a down payment on a house.
3. Highest house price they can afford.
4. Monthly payment for a 30-year mortgage at 4.5% APR.

**Part 3: Report to George and Martha**

Now that you have completed your calculations, create a report outlining your recommendations:

- Recommended car purchase with justification, referencing formulas and calculations.
- Explanation of how you arrived at the amount to be saved monthly, referencing formulas and calculations.
- Explanation of how you determined the most expensive house they can afford and the monthly payment resulting from the purchase of that house.