bundle install returns "Could not locate Gemfile"

I'm new to Rails and am currently working through a guide. The guide states: Use a text editor to update the Gemfile needed by Bundler with the contents of Listing 2.1. ``` source 'https://rubygems.org' gem 'rails', '3.2.3' group :development do gem 'sqlite3', '1.3.5' end # Gems used only for assets and not required # in production environments by default. group :assets do gem 'sass-rails', '3.2.4' gem 'coffee-rails', '3.2.2' gem 'uglifier', '1.2.3' end gem 'jquery-rails', '2.0.0' group :production do gem 'pg', '0.12.2' end ``` We then install and include the gems using the `bundle install` command: ``` $ bundle install --without production ``` If Bundler complains about `no such file to load -- readline (LoadError)` try adding `gem ’rb-readline’` to your Gemfile.) I followed the steps even adding on `gem 'rb-readline'` to the `Gemfile`, but apparently the file can't be found and when I go to my text editor I do see the `Gemfile` itself. I noticed that they made me put `gem 'rails', 3.2.3` and my version of Rails is 3.2.1 so I tried changing it to 3.2.1 but that didn't work either. Any thoughts or advice would be much appreciated.