Vin decides he wants a brand new sports car to race. He has just taken out an $90,000 loan to purchase the car. ? a. The bank will allow him to pay the loan off in 10 years after he has made enough money from his competitions using one of the following two options: Option A) 9.6 %/a compounded monthly Option B) 9.7 %/a compounded semi-annually i) Which option is better? ii) How much does he save with the better option? b. If Vin is able to put $15,000 down on the car and pay back the loan in 6 years, the bank will reduce the interest rate to 9%/a compounded annually. How much money would he save if he put a down payment on the car? (Compare it to the better option in a.)
Vin decides he wants a brand new sports car to race. He has just taken out an $90,000 loan to purchase the car. ? a. The bank will allow him to pay the loan off in 10 years after he has made enough money from his competitions using one of the following two options: Option A) 9.6 %/a compounded monthly Option B) 9.7 %/a compounded semi-annually i) Which option is better? ii) How much does he save with the better option? b. If Vin is able to put $15,000 down on the car and pay back the loan in 6 years, the bank will reduce the interest rate to 9%/a compounded annually. How much money would he save if he put a down payment on the car? (Compare it to the better option in a.)
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter9: Current Liabilities, Contingencies, And The Time Value Of Money
Section: Chapter Questions
Problem 9.12MCP
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