A store offers two payment plans. Under the installment plan, you pay 20% down and 20% of the purchase price in each of the next 3years. If you pay the entire bill immediately, you can take a 10% discount from the purchase price.a. Which is the better deal if the interest rate is 6.0%?Installment PlanO Immediate Planb. How will your answer change if the four payments on the instalments do not start until the end of the year?O Installment PlanO Immediate Plan

First we need to calculate, present value of future payment by using this equation PV =FV(1+i)n…

Answered: A store offers two payment plans. Under…

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter7: Using Consumer Loans

Section: Chapter Questions

Problem 6FPE

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Similar questions

Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of 50,000. First City has offered Hawley the alternatives listed here. Calculate the effective annual interest rate for each alternative. Which alternative has the lowest effective annual interest rate? a. A 12% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year b. A 9% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year c. An 8.75% annual rate on a discounted loan, with a 15% compensating balance d. Interest figured as 8% of the 50,000 amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the year
Calculating and comparing add-on and simple interest loans. Eli Nelson is borrowing 10,000 for five years at 7 percent. Payments, which are made on a monthly basis, are determined using the add-on method. a. How much total interest will Eli pay on the loan if it is held for the full five-year term? b. What are Elis monthly payments? c. How much higher are the monthly payments under the add-on method than under the simple interest method?
Calculating single-payment loan amount due at maturity. Stanley Price plans to borrow 8,000 for five years. The loan will be repaid with a single payment after five years, and the interest on the loan will be computed using the simple interest method at an annual rate of 6 percent. How much will Stanley have to pay in five years? How much will he have to pay at maturity if hes required to make annual interest payments at the end of each year?
Marathon Peanuts converts a $130,000 account payable into a short-term note payable, with an annual interest rate of 6%, and payable in four months. How much interest will Marathon Peanuts owe at the end of four months? A. $2,600 B. $7,800 C. $137,800 D. $132,600
Calculating interest and APR of installment loan. Assuming that interest is the only finance charge, how much interest would be paid on a 5,000 installment loan to be repaid in 36 monthly installments of 166.10? What is the APR on this loan?
A store offers two payment plans. Under the installment plan, you pay 25% down and 25% of the purchase price in each of the next 3 years. If you pay the entire bill immediately, you can get a discount of 12% on the purchase price. Assume the product sells for $100. a-1. Calculate the present value of the payments if you can borrow or lend funds at an interest rate of 7 percent.
A store offers two payment plans. Under the installment plan, you pay 25% down and 25% of the purchase price in each of the next 3 years. If you pay the entire bill immediately, you can take a 10% discount from the purchase price. Assume the product sells for $100. a-1. Calculate the present value of the payments if you can borrow or lend funds at an interest rate of 5 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.) a-2 Which is a better deal? b-1. Calculate the present value if the payments on the 4-year installment plan do not start for a full year. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b-2. Which is a better deal?
ABC Bank offers to lend you $50,000 for one year at a quoted annual rate of 8.46% with each payment at the end of each month. DEF Bank also offers to lend you the same amount at a quoted annual rate of 8.63%, with each payment at the end of each quarter. What is the difference in the effective annual rates charged by the two banks? Group of answer choices 0.12% 0.16% 0.14% 0.10% 0.18%
A store offers a 'special deal' to lend us $5,500 today, whereby you pay off the loan in one year with 12 monthly payments of $500 each, with the first payment due 1-month from today. What effective annual rate (EAR) are they charging us on the loan?
You take out a $9,000 car loan that calls for 36 monthly payments starting after 1 month at an APR of 9%. What is your monthly payment? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. What is the effective annual interest rate on the loan? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Now assume the payments are made in three annual year-end installments. What annual payment would have the same present value as the monthly payment you calculated? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
16. A store offers two payment plans. Under the instalment plan, you pay 25% down and 25% of the purchase price in each of the next 3 years. If you pay the entire bill immediately, you can take a 10% discount from the purchase price. a. If you can borrow or lend funds at a 6% interest rate, which is the better deal? b. If the payments on the 4-year instalment plan do not start for a full year, which plan is a better deal?
A supplier is offering your firm a cash discount of 2 percent if purchases are paid for within ten days; otherwise, the bill is due at the end of 60 days. Would you recommend borrowing from a bank at an 18 percent annual interest rate to take advantage of the cash discount offer? Yes No

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