Suppose that you decide to buy a car for $60,000, including taxes and license fees. You saved $11,000 for a down payment. The dealer is offering you a choice between two incentives. Incentive A is $4000 off the price of the car, followed by a five-year loan at 6.04%. Incentive B does not have a cash rebate, but provides free financing (no interest) over five years. What is the difference in monthly payments between the two offers? Which incentive is the better deal? Use PMT = nt'

Suppose that you decide to buy a car for $60,000, including taxes and license fees. You saved $11,000 for a down payment. The dealer is offering you a choice between two incentives. Incentive A is $4000 off the price of the car, followed by a five-year loan at 6.04%. Incentive B does not have a cash rebate, but provides free financing (no interest) over five years. What is the difference in monthly payments between the two offers? Which incentive is the better deal? Use PMT = nt'

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 15P

See similar textbooks

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
Suppose that you decide to buy a car for $65,000, including taxes and license fees. You saved $13,000 for a down payment. The dealer is offering you a choice between two incentives. Incentive A is $7000 off the price of the car, followed by a three-year loan at 6.37%. Incentive B does not have a cash rebate, but provides free financing (no interest) over three years. What is the difference in monthly payments between the two offers? Which incentive is the better deal?
Suppose that you decide to buy a car for $58,000, including taxes and license fees. You saved $10,000 for a down payment. The dealer is offering you a choice between two incentives. Incentive A is $7000 off the price of the car, followed by a three-year loan at 5.53%. Incentive B does not have a cash rebate, but provides free financing (no interest) over three years. What is the difference in monthly payments between the two offers? Which incentive is the better deal? Use PMT=Prn1−1+rn−nt.
Suppose that you decide to buy a car for $61,000, including taxes and license fees. You saved $11,000 for a down payment. The dealer is offering you a choice between two incentives. Incentive A is $6000 off the price of the car, followed by a four-year loan at 6.83%. Incentive B does not have a cash rebate but provides free financing (no interest) over four years. What is the difference in monthly payments between the two offers? Which incentive is the better deal? Use PMT=P(R/N)/1−(1+r/n)^−nt. The difference in monthly payments between the two offers is $_________. (Round to the nearest cent as needed.)
Suppose that you have decided to buy a certain car that costs $28,950, including taxes and license fees. The dealership gives you two financing options: 1) Option A: The dealership takes $800 off the price of the car. You must make a down payment of $2000 and can finance the rest at 2.99% APR for 72 months. a) How much will you be financing? b) How much will your monthly payments be under this option? (Round to the nearest dollar.) c) How much total money will you pay under this option? (Don’t forget to include your down payment.) 2) Option B: The dealership takes $1000 off the price and 0% financing for 36 months. a) How much will you be financing? b) How much will your monthly payments be under this option? (Round to the nearest dollar.) c) How much total money will you pay under this option? 3) Would you choose option A or option B? Why?
You are considering buying a new car worth $I5,000. You can finance the car either by withdrawing cash from your savings account, which earns 8% interest compounded monthly, or by borrowing $I5,000 from your dealer for four years at 11% interest compounded monthly. You could earn $5,635 in interest from your savings account in four years if you leave the money in the account. If you borrow $15,000 from your dealer, you pay only $3,609 in interest over four years, so it makes sense to borrow for your new car and keep your cash in your savings account. Do you agree or disagree with the foregoing statement? Justify your reasoning with a numerical calculation.
Suppose you want to buy a car. You have surveyed the dealers' newspaper advertisements, and the one shown has caught your attention. You can afford to make a down payment of $2,678.95, so the net amount to be financed is $20,000.(a) What would the monthly payment be?(b) After the 25th payment, you want to pay off the remaining loan in a lumpsum amount. What is this lump sum?
A student is buying a new car. The car’s price is $37,500, the sales tax is 6%, and the title, license, and registration fee is $1250 to be paid in cash. The dealer offers to finance 95% of the car’s price for 48 months at a nominal interest rate of 9% per year, compounded monthly. (a) How much cash is paid when the car is purchased? (b) How much is the monthly payment?
You have decided to buy a car with price tag of $30,000 but you are able to negotiate the price down to $28,000. You have $1,000 saved, so you need to borrow $27,000 in a 5-year loan from your bank (your bank offers lower rates than the auto-dealer) at a 3% APR (annual rate). How much will you owe to the bank after 2 years?
You are buying a new car, and you plan to finance your purchase with a loan you will repay over 48 months. The car dealer offers two options: either dealer financing with a low APR, or a $2500 rebate on the purchase price. If you use dealer financing, you will borrow $13,000 at an APR of 3.9%. If you take the rebate, you will reduce the amount you borrow to $10,500, but you will have to go to the local bank for a loan at an APR of 8.87%. To answer the first question below, you may need the following formula, where M is your monthly payment, in dollars, if you borrow P dollars with a term of 48 months at a monthly interest rate of r (as a decimal), and r = APR/12. M = Pr(1 + r)48 (1 + r)48 − 1 Should you take the dealer financing or the rebate? dealer financingrebate How much will you save over the life of the loan by taking the option you chose? (Round your answer to the nearest cent.)$
After deciding to get a new car at Ehlert Motors, your options are to purchase it with a three-year loan or to lease it for three years. The car you wish to buy costs $38,600. the dealer has a special loan financing offer: if you make a 10% down payment, you qualify for a special 0.96% APR compounded monthly (much lower than the competitive market 3.6% APR compounded monthly). If you purchase the car with the loan, you expect to be able to sell it in 3 years for $22,000. If you lease the car, it has no residual value (you must turn it in at the end of the lease). To make you indifferent between purchasing and leasing, what would the present value of all lease payments need to be? Because we weren't given lease information, I believe we just need to calculate the PV of the purchasing option.
Suppose that you decide to buy a car for $28,635, including taxes taxes and license fees. You saved $7000 for a down payment and can get a four-year car loan at 6.87%. The monthly payment is $_____ The total interest for the loan is $___________