A used car dealer advertises financing at 0% interest over 3 years with monthly payments. You must pay a processing fee of $500 at signing. The car you like costs $9000. (a) What is your effective annual interest rate? (b) You believe that the dealer would accept $8200 if you paid cash. What effective annual interest rate would you be paying, if you financed with the dealer?
A used car dealer advertises financing at 0% interest over 3 years with monthly payments. You must pay a processing fee of $500 at signing. The car you like costs $9000. (a) What is your effective annual interest rate? (b) You believe that the dealer would accept $8200 if you paid cash. What effective annual interest rate would you be paying, if you financed with the dealer?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 15P
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A used car dealer advertises financing at 0% interest over 3 years with monthly payments. You must pay a processing fee of $500 at signing. The car you like costs $9000.
(a) What is your effective annual interest rate?
(b) You believe that the dealer would accept $8200 if you paid cash.
What effective annual interest rate would you be paying, if you financed with the dealer?
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