The "Fly By Night" Used Car Lot uses the following to illustrate their 11.8% finance plan on a car paid over 4 years. Cost of the car: $15000 11.8% finance charge: $7080 (that is, 11.8%/year x $15000 x 4 years) Total cost: $22080 $22080 Monthly payment: = $460. 48 The first payment must be made one month after purchase. On the other hand, if you pay cash the dealer will offer you a discount of 5% of the cost of the car. What is the true interest rate compounded monthly being charged?

The "Fly By Night" Used Car Lot uses the following to illustrate their 11.8% finance plan on a car paid over 4 years. Cost of the car: $15000 11.8% finance charge: $7080 (that is, 11.8%/year x $15000 x 4 years) Total cost: $22080 $22080 Monthly payment: = $460. 48 The first payment must be made one month after purchase. On the other hand, if you pay cash the dealer will offer you a discount of 5% of the cost of the car. What is the true interest rate compounded monthly being charged?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 28P

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