You are about to purchase a new car and have two options to pay for it. You can pay $20,000 in cash immediately, or you can get a loan that requires you to pay $500 each month for the next 48 months (four years). If the monthly interest rate you earn on your cash is 0.5%, which option should you take? Why?

Q: You want to buy a boat, and a local bank will lend you $25,000. The loan will be fully amortized…

A: Loan amortization is the process of reimbursement of loan periodically by the borrower of the loan…

Q: Spencer would like to purchase a new car for $12,000.  How much will his monthly payments be if he…

A: The monthly payment amount can be calculated with the help of present value of annuity function.

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A: Given Information: If debt financing is opted: Amount borrowed will be $13,000 APR is 3.9% If rebate…

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Q: 1. Nelson wants to buy a car that costs $42,000. He has arranged to borrow the total purchase price…

A: Using the PMT function in excel

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A: Solved using Financial Calculator  Assuming Interest rate is 0.9% per annum compounded monthly…

Q: You are ready to buy a house. Total price is $160,105. For the remaining part, you plan to borrow…

A:

Q: If you want to buy a car, and you can afford a monthly payment of $425, how large of a loan can you…

A: Using excel PV function to get the loan amount

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A: The given problem can be solved using RATE function in excel. RATE function provides interest rate…

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A: “Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

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Q: What is the monthly loan payment?

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A: We use PMT function to calculate annual payments

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A: Hello. Since your question has multiple sub-parts, we will solve first three sub-parts for you. If…

Q: You want to buy a car, and a local bank will lend you $20,000. The loan would be fully amortized…

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Q: what price of car can you afford?

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Q: you want to buy a car, and a local bank will lend you $20,000. The loan will be fully amortized over…

A: Given:

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A: It can be calculated using PMT function in excel. PMT(rate, nper, pv, [fv], [type]) Rate The…

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A: Computation of Present value is as follows: Explanation of Computation of Present Value is as…

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Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.