Consider the following two options proposed by anauto dealer:Option A: purchase the vehicle at the normal price of$50,000 and pay for the vehicle over 48 months withequal monthly payments at 3% APR financing.Option B: purchase the vehicle at a discounted priceof $48,056.90 to be paid immediately. The funds thatwould be used to purchase the vehicle are presently ina savings account that earns 5% compoundedmonthly.Which option is more economically sound?Option BO None of these options is goodOption AOptions are equivalent (you are indefferent)

The time value of money is a concept in finance that takes into account the effect of compounding,…

Answered: Consider the following two options…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You are considering two options in purchasing an automobile:Option A: Purchase the vehicle worth $26,200 and pay for the vehicle over3 years with equal monthly payments at 3% APR financing.Option B: Purchase the vehicle at a discount price of $24,000 to be paid immediately.The funds, which would be used to purchase the vehicle, are presently earning6% annual interest compounded monthly. Which of the following statements isincorrect?(a) If you go with Option A, the monthly payment would be $761.93.(b) Option B is a better choice if you have enough money to purchase in cash.
Consider the following two options proposed by an auto dealer:• Option A: Purchase the vehicle at the normal price of $26,200 and pay forthe vehicle over 36 months with equal monthly payments at 1.9% APRfinancing.• Option B: Purchase the vehicle at a discounted price of $24,048 to be paid immediately.The funds that would be used to purchase the vehicle are presently earning 5% annual interest compounded monthly.Which option is more economically sound?
Milan plans to purchase a new work truck. The dealer requires a 10% down payment on the s36,000 vehicle. Milan will finance the rest of the cost with a fixed-rate amortized auto loạn at 9% annual interest with monthly payments over 5 years. Complete the parts below. Do not round any intermediate computations Round your final answers to the nearest cent if necessary. If necessary, refer to the list of financial formulas. (a) Find the required down payment. (b) Find the amount of the auto loan. (c) Find the monthly payment.
Show complete solution: Consider the following options in purchasing a car: Option 1 = purchase the normal price at a $26,200 and pay for the vehicle over 36 months with equal equity payments at 1.9% APR financing. Option 2 = Purchase the vehicle at a discounted price of $24,048 to be paid immediately (Cash). The funds that would be used is earning a 5% annual interest compounded monthly. a. Which option is more economical?
Suppose that you have decided to buy a certain car that costs $28,950, including taxes and license fees. The dealership gives you two financing options: 1) Option A: The dealership takes $800 off the price of the car. You must make a down payment of $2000 and can finance the rest at 2.99% APR for 72 months. a) How much will you be financing? b) How much will your monthly payments be under this option? (Round to the nearest dollar.) c) How much total money will you pay under this option? (Don’t forget to include your down payment.) 2) Option B: The dealership takes $1000 off the price and 0% financing for 36 months. a) How much will you be financing? b) How much will your monthly payments be under this option? (Round to the nearest dollar.) c) How much total money will you pay under this option? 3) Would you choose option A or option B? Why?
Goran plans to buy a used truck that costs $15,000. The dealer requires a 20% down payment. The rest of the cost is financed with a 3-year, fixed-rate amortized auto loan at 5.5% annual interest with monthly payments. Complete the parts below. Do not round any intermediate computations. Round your final answers to the nearest cent if necessary. If necessary, refer to the list of financial formulas.
You are considering purchasing a 2021 RX Hybrid for $47,920. The Lexus dealer is offering the following three options to own or lease the vehicle: Option 1. Receive a $3,500 rebate on the price of the car and finance the balance over 5 years at 3.2% interest. Option 2. Finance the vehicle for 60 months at 0 % interest. Option 3. Lease the vehicle for 36 months with $529 monthly payment and $3,999 due at signing. What is the monthly payment for Option 1? What is the total cost of Option 1? 2.What is the monthly payment for Option 2? 3.Which option would you recommend based on total cost of the car? What other factors should you consider?
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You purchase an RV by making a down payment of $10,500. The terms of your finance agreement have an annual interest rate of 2.56%, compounded monthly, and require you to make 36 monthly payments of $1,495.75 each. What is the cash price (in dollars) of your RV? (Round your answer to the nearest dollar.) $ 659855 X
Compute the monthly payments for a vehicle that costs $16400 if you financed the entire purchase over 4 years at an annual interest rate of 6.50 percent. Also, calculate the loan payments assuming rates of 5.50 percent and 7.50 percent. Compare the total amount spent on the vehicle under each assumption.

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