Tracy wants to buy a new car. She is provided with two options by the dealership: $6,000 cash back or 0% financing for 60months on the $50,000 car that she wants to buy, Tracy determines that the cash back is the best option, as her alternativechoice is to borrow from the bank at 0.99% APR, compounded monthly, for 60 months. Prior to finalizing her choice, the bankcalls Tracy back and tells her that because of Federal Reserve rate hikes, the new interest rate at the bank is 5.99% APR. Withthis new interest rate, should Tracy reconsider her choice of the cash back option?O No, the value of the 0% financing decreases with the higher rate at the bankO Yes, the cash back option now has higher present valueO Yes, the value of the 0% financing increases with the higher rate at the bankO No, the cash back option now has lower present value

Cash value of car = $50,000Alternative 1: Getting CashbackIf Tracy wants to opt for cashback, she…

Answered: Tracy wants to buy a new car. She is…

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter17: Accounting For Notes And Interest

Section: Chapter Questions

Problem 1MYW

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Michiko and Saul are planning to attend the same university next year. The university estimates tuition, books, fees, and living costs to be 12,000 per year. Michikos father has agreed to give her the 12,000 she needs to attend the university. Saul has obtained a job at the university that will pay him 14,000 per year. After discussing their respective arrangements, Michiko figures that Saul will be better off than she will. What, if anything, is wrong with Michikos thinking?
Carlos opens a dry cleaning store during the year. He invests 30,000 of his own money and borrows 60,000 from a local bank. He uses 40,000 of the loan to buy a building and the remaining 20,000 for equipment. During the first year, the store has a loss of 24,000. How much of the loss can Carlos deduct if the loan from the bank is nonrecourse? How much does Carlos have at risk at the end of the first year?
Wilma wants to buy a car that costs $52,000. She has arranged to borrow the total purchase price of the car from her bank at 6 percent interest rate. The loan requires monthly payments for a period of five years. If the first payment is due in one month after purchasing the car, what will be the amount of Wilma’s monthly payment on the loan?
Lashonda is taking out an amortized loan for $29,000 to buy a new car and is deciding between the offers from two lenders.She wants to know which one would be the better deal over the life of the car loan, and by how much.Answer each part. Do not round intermediate computations, and round your answers to the nearest cent.If necessary, refer to the list of financial formulas . (a) Her credit union has offered her a 7 -year car loan at an annual interest rate of 6.4% . Find the monthly payment. $ (b) A bank has offered her a 5 -year car loan at an annual interest rate of 6.4% . Find the monthly payment. $ (c) Suppose Lashonda pays the monthly payment each month for the full term. Which lender's car loan would have the lowest total amount to pay off, and by how much? Credit union The total amount paid would be$less than to the bank. Bank The total amount paid would be$less than to the credit union.
Andie needs to borrow $6,000 to buy a car. One dealer offers her a monthly payment of $193.60 on a 3-year loan with an APR of 10 percent while another dealer offers her a monthly payment of $158.00 on a 4-year loan with an APR of 12 percent. If she can afford to make either payment, which loan costs less overall?
Brian is planning to purchase a car. The list price of the car is $42000. If Brian pays cash for the car, the dealer will reduce the price by 10%. Otherwise, the dealer will provide financing the terms of which require Brian to pay $9480 at the end of each of the next five years. The effective interest rate to the nearest percent for the financing arrangement for the five annual payments, assuming that the amount financed equals the cash price of the car is
Paula is considering the purchase of a new car. She has narrowed her search to two cars that are equally appealing to her. Car A costs $25,000, and Car B costs $25,400. The manufacturer of Car A is offering 0% financing for 48 months with zero down, while the manufacturer of Car B is offering a rebate of $2000 at the time of purchase plus financing at the rate of 3%/year compounded monthly over 48 months with zero down. If Paula has decided to buy the car with the lower net cost to her, which car should she purchase? (Round numerical values to the nearest cent.) net cost of Car A $ net cost of Car B $ car she should purchas
Paula is considering the purchase of a new car. She has narrowed her search to two cars that are equally appealing to her. Car A costs $25,000, and Car B costs $25,300. The manufacturer of Car A is offering 0% financing for 48 months with zero down, while the manufacturer of Car B is offering a rebate of $2000 at the time of purchase plus financing at the rate of 3%/year compounded monthly over 48 months with zero down. If Paula has decided to buy the car with the lower net cost to her, which car should she purchase? (Round numerical values to the nearest cent.) net cost of Car A $ net cost of Car B $
Anna is buying $16,000 worth of rare coins as an investment. The dealer is charging her an annual interest rate of %7.2 and is using the add-on method to compute her monthly payments. a. If Anna pays off the coins in 48 months, what are her monthly payments? b. If she makes a down payment of $3,000, how much will this reduce her monthly payments? c. If she wants to have monthly payments of $325, how large should her down payment be?

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