Suppose you are in the market for a new car worth $18,000. You are offered a deal to make a $1,800 down payment now and to pay the balance in equal end-of-month payments of $421.85 over a 48-month period. Consider the following situations:(a) Instead of going through the dealer's financing, you want to make a down payment of $1,800 and take out an auto loan from a bank at 11.75% compounded monthly. What would be your monthly payment to pay off the loan in four years?(b) If you were to accept the dealer's offer, what would be the effective rate of interest per month charged by the dealer on your financing?
Suppose you are in the market for a new car worth $18,000. You are offered a deal to make a $1,800 down payment now and to pay the balance in equal end-of-month payments of $421.85 over a 48-month period. Consider the following situations:(a) Instead of going through the dealer's financing, you want to make a down payment of $1,800 and take out an auto loan from a bank at 11.75% compounded monthly. What would be your monthly payment to pay off the loan in four years?(b) If you were to accept the dealer's offer, what would be the effective rate of interest per month charged by the dealer on your financing?
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 14P
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Suppose you are in the market for a new car worth $18,000. You are offered a deal to make a $1,800 down payment now and to pay the balance in equal end-of-month payments of $421.85 over a 48-month period. Consider the following situations:
(a) Instead of going through the dealer's financing, you want to make a down payment of $1,800 and take out an auto loan from a bank at 11.75% compounded monthly. What would be your monthly payment to pay off the loan in four years?
(b) If you were to accept the dealer's offer, what would be the effective rate of interest per month charged by the dealer on your financing?
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