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Assume the car can be purchased for 0% down for 60 months (in lieu of rebate).
$
(b) Find the monthly payment if financed at 2.5% add-on interest for 60 months. (Round your answer to the nearest cent.)
$
(c) Use the APR approximation formula to find the APR for part (b). (Round your answer to one decimal place.)
%
(d) State whether the 0% APR or the 2.5% add-on rate should be preferred.
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- 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 yearNow assume that it is several years later. The brothers are concerned about the firm’s current credit terms of net 30, which means that contractors buying building products from the firm are not offered a discount and are supposed to pay the full amount in 30 days. Gross sales are now running $1,000,000 a year, and 80% (by dollar volume) of the firm’s paying customers generally pay the full amount on Day 30; the other 20% pay, on average, on Day 40. Of the firm’s gross sales, 2% ends up as bad-debt losses. The brothers are now considering a change in the firm’s credit policy. The change would entail: (1) changing the credit terms to 2/10, net 20, (2) employing stricter credit standards before granting credit, and (3) enforcing collections with greater vigor than in the past. Thus, cash customers and those paying within 10 days would receive a 2% discount, but all others would have to pay the full amount after only 20 days. The brothers believe the discount would both attract additional customers and encourage some existing customers to purchase more from the firm—after all, the discount amounts to a price reduction. Of course, these customers would take the discount and hence would pay in only 10 days. The net expected result is for sales to increase to $1,100,000; for 60% of the paying customers to take the discount and pay on the 10th day; for 30% to pay the full amount on Day 20; for 10% to pay late on Day 30; and for bad-debt losses to fall from 2% to 1% of gross sales. The firm’s operating cost ratio will remain unchanged at 75%, and its cost of carrying receivables will remain unchanged at 12%. To begin the analysis, describe the four variables that make up a firm’s credit policy and explain how each of them affects sales and collections.Assume the car can be purchased for 0% down for 60 months (in lieu of rebate). A car with a sticker price of $42,750 with factory and dealer rebates of $5,100. Find the monthly payment if financed for 60 months at 0% APR. (Round your answer to the nearest cent.)$ ?Find the monthly payment if financed at 2.5% add-on interest for 60 months. (Round your answer to the nearest cent.)$ ?Use the APR approximation formula to find the APR for part (b). (Round your answer to one decimal place.)? %
- Assume the car can be purchased for 0% down for 60 months (in lieu of rebate). A car with a sticker price of $36,350 with factory and dealer rebates of $4,200 (a) Find the monthly payment if financed for 60 months at 0% APR. (Round your answer to the nearest cent.)$ (b) Find the monthly payment if financed at 2.5% add-on interest for 60 months. (Round your answer to the nearest cent.)$ (c) Use the APR approximation formula to find the APR for part (b). (Round your answer to one decimal place.) %(d) State whether the 0% APR or the 2.5% add-on rate should be preferred.Assume the car can be purchased for 0% down for 60 months (in lieu of rebate). A car with a sticker price of $42,100 with factory and dealer rebates of $5,100. Hint: See Section 11.2, Example 5. (a) Find the monthly payment if financed for 60 months at 0% APR. (Round your answer to the nearest cent.)$ (b) Find the monthly payment if financed at 2.5% add-on interest for 60 months. (Round your answer to the nearest cent.)$ (c) Use the APR approximation formula to find the APR for part (b). (Round your answer to one decimal place.) %(d) State whether the 0% APR or the 2.5% add-on rate should be preferred. 0% APR2.5% add-on rateAssume the car can be purchased for 0% down for 60 months (in lieu of rebate). A BMW that has a sticker price of $62,440 with factory and dealer rebates of $6,000 (a) Find the monthly payment if financed for 60 months at 0% APR. (Round your answer to the nearest cent.)$ (b) Find the monthly payment if financed at 2.5% add-on interest for 60 months. (Round your answer to the nearest cent.)$ (c) Use the APR approximation formula to find the APR for part (b). (Round your answer to one decimal place.) %(d) State whether the 0% APR or the 2.5% add-on rate should be preferred. 0% APR2.5% add-on rate
- Assume the car can be purchased for 0% down for 60 months (in lieu of rebate). A BMW that has a sticker price of $62,590 with factory and dealer rebates of $6,000. the monthly payment if financed for 60 months at 0% APR. (Round your answer to the nearest cent.)$1043.17 (b) Find the monthly payment if financed at 2.5% add-on interest for 60 months. (Round your answer to the nearest cent.)$ ?Use the APR approximation formula to find the APR for part (b). (Round your answer to one decimal place.)? %State whether the 0% APR or the 2.5% add-on rate should be preferred. 0%Assume the car can be purchased for 0% down for 60 months (in lieu of rebate). A BMW that has a sticker price of $62,590 with factory and dealer rebates of $6,000. Find the monthly payment if financed for 60 months at 0% APR. (Round your answer to the nearest cent.)$ Find the monthly payment if financed at 2.5% add-on interest for 60 months. (Round your answer to the nearest cent.)$ Use the APR approximation formula to find the APR for part (b). (Round your answer to one decimal place.) %State whether the 0% APR or the 2.5% add-on rate should be preferred.Assume the car can be purchased for 0% down for 60 months (in lieu of rebate). A BMW that has a sticker price of $62,470 with factory and dealer rebates of $6,000. Hint: See Section 11.2, Example 5 (a) Find the monthly payment if financed for 60 months at 0% APR. (Round your answer to the nearest cent.)$ (b) Find the monthly payment if financed at 2.5% add-on interest for 60 months. (Round your answer to the nearest cent.)$ (c) Use the APR approximation formula to find the APR for part (b). (Round your answer to one decimal place.) %(d) State whether the 0% APR or the 2.5% add-on rate should be preferred.
- A car can be purchased for 0% down for 60 months (in lieu of rebate). It has a sticker price of $62,570 with rebates of $6000. what is the monthly payment if financed at 2.5% add-on interest for 60 months (round to the nearest cent) and using the APR approximation formula what is the APR (round to one decimal place)An auto dealership is advertising that a new car with a sticker price of $33,408 is on sale for $25,995 if payment is made in full, or it can be financed at 0% interest for 72 months with a monthly payment of $464. Note that 72 payments × $464 per payment = $33,408, which is the sticker price of the car. By allowing you to pay for the car in a series of payments (starting one month from now) rather than $25,995 now, the dealer is effectively loaning you $25,995. If you choose the 0% financing option, what is the effective interest rate that the auto dealership is earning on your loan? (Hint: Discount the payments back to current dollars, and use Goal Seek to find the discount rate that makes the net present value of the payments = $25,995.) Enter your answer as a percentage. If required, round your answer to one decimal digit.An auto dealership is advertising that a new car with a sticker price of $33,768 is on sale for $25,995 if payment is made in full, or it can be financed at 0% interest for 72 months with a monthly payment of $469. Note that 72 payments × $469 per payment = $33,768, which is the sticker price of the car. By allowing you to pay for the car in a series of payments (starting one month from now) rather than $25,995 now, the dealer is effectively loaning you $25,995. If you choose the 0% financing option, what is the effective interest rate that the auto dealership is earning on your loan? (Hint: Discount the payments back to current dollars, and use Goal Seek to find the discount rate that makes the net present value of the payments = $25,995.)