Denzel needs a new car. At the dealership, he finds the car that he likes. The dealership gives him two payment options:1. Pay $32,500 for the car today.2. Pay $3,500 at the end of each quarter for three years.Required:1-a. Assuming Denzel uses a discount rate of 8% (or 2% quarterly), calculate the present value.1-b. Which option gives him the lower cost?Complete this question by entering your answers in the tabs below.Req 1AReq 1BAssuming Denzel uses a discount rate of 8% (or 2% quarterly), calculate the present value. (FV of $1, PV of $1, FVA of $1,and PVA of $1) (Use tables, Excel, or a financial calculator. Round your answers to 2 decimal places.)Present ValueOption 1Option 2

The term "present value" (PV) refers to the value at the current time of a quantity of money or…

Answered: Denzel needs a new car. At the…

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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es Denzel needs a new car. At the dealership, he finds the car that he likes. The dealership gives him two payment options: 1. Pay $28,000 today for the car. 2. Pay $2,600 at the end of each quarter for three years. Required: 1-a. Assuming Denzel uses a discount rate of 12% (or 3% quarterly), calculate the present value. 1-b. Which option gives him the lower cost? Complete this question by entering your answers in the tabs below. Req 1A Req 1B Assuming Denzel uses a discount rate of 12% (or 3% quarterly), calculate the present value. Note: Use tables, Excel, or a financial calculator. Round your answers to 2 decimal places. (FV of $1, PV of $1, FVA of $1, and PVA of $1) Present Value Option 1 Option 2
Denzel needs a new car. At the dealership, he finds the car that he likes. The dealership gives him two payment options:1. Pay $35,000 for the car today.2. Pay $4,000 at the end of each quarter for three years.Required:Assuming Denzel uses a discount rate of 12% (or 3% quarterly), determine which option gives him the lower cost.
Denzel needs a new car. At the dealership, he finds the car that he likes. The dealership gives him two payment options: 1. Pay $35,000 for the car today. 2. Pay $4,000 at the end of each quarter for three years. Required: 1-a. Assuming Denzel uses a discount rate of 12% (or 3% quarterly), calculate the present value. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answers to 2 decimal places.) Present Value Option 1 Option 2 1-b. Which option gives him the lower cost? Option 1 Option 2
You have decided to buy a car, the price of the car is $18,000. The car dealer presents you with two choices: Purchase the car for cash and receive $2000 instant cash rebate – your out of pocket expense is $16,000 today. Purchase the car for $18,000 with zero percent interest 36-month loan with monthly payments. The market interest rate is 4%. Which of the option above is cheaper? How much do you save? Formula attached
You plan to buy a new car. The car dealer offers the following two options: Option A: Pay $12,000 each year for 3 years Option B: Pay $1,000 each month for 3 years Your friend recommends option A. Do you agree?
Suppose that after buying a new car you decide to sell your old car to a friend. You accept a 290-day note for $6500 at 20% simple interest as payment. (Both simple and principal interest are paid at the end of 290 days.) 100 days later you find that you need the money and sell the note to a third party for $5500. What annual interest rate will the third party receive for the investment? Express your answer as a percentage, correct to three decimal places.
You are shopping for a car and read the following advertisement in the newspaper: "Own a new Spitfire! No money down. Four annual payments of just$10,000." You have shopped around and know that you can buy a Spitfire for cash for$32,500. What is the interest rate the dealer is advertising (what is the IRR of the loan in the advertisement)? Assume that you must make the annual payments at the end of each year.
After deciding to acquire a new car, you can either lease the car or purchase it with a three-year loan. The car you want costs $37,000. The dealer has a leasing arrangement where you pay $2,400 today and $580 per month for the next three years. If you purchase the car, you will pay it off in monthly payments over the next three years at an APR of 6 percent. You believe that you will be able to sell the car for $22,000 in three years. a. What is the present value of leasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the present value of purchasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What break-even resale price in three years would make you indifferent between buying and leasing?
A car dealer offers to buy your car for $9,500 so that you can purchase a new one. If your monthly payment is $464.23 with an annual interest rate of 3.9% and you have 20 more payments remaining, is the present value of your car loan more or less than the amount the dealer is offering? How much Less?
After deciding to acquire a new car, you realize you can either lease the car or purchase it with a two-year loan. The car you want costs $34,000. The dealer has a leasing arrangement where you pay $97 today and $497 per month for the next two years. If you purchase the car, you will pay it off in monthly payments over the next two years at an APR of 6 percent. You believe that you will be able to sell the car for $22,000 in two years. What is the present value of purchasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value of lease $ What is the present value of leasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value of purchase $ What break-even resale price in two years would make you indifferent between buying and leasing? (Do not round intermediate calculations and round your answer to 2…
Sarah Maddox wants to buy a new car that will cost $15,000. She will make a down payment in the amount of $3,000. She would like to borrow the remainder from a bank at an interest rate of 8% compounded monthly. She agrees to make monthly payments for a period of two years in order to pay off the loan.Select the correct answer for each of the following questions:(a) What is the amount of the monthly payment (A)?1. A = $12,000 (A/P, 0.75%, 24).2. A = $12,000 (A/F, 0.66%, 24).3. A = $12,000 (A/P, 0.66%, 24).4. A = $12,000 (A/F, 9%, 2)/12. (b) Sarah has made 12 payments and wants to figure out the remaining balance immediately after the 12th payment. What is that remaining balance?1. B12 = 12A.2. B12 = A(P/A, 9%, 1)/12.3. B12 = A(P/A, 0.66%, 12).4. B12 = 10,000-12A.
After deciding to get a new car, you can either lease the car or purchase it with a three-year loan. The car you wish to buy costs $39,500. The dealer has a special leasing arrangement where you pay $108 today and $508 per month for the next three years. If you purchase the car, you will pay it off in monthly payments over the next three years at an APR of 6 percent, compounded monthly. You believe that you will be able to sell the car for $27,500 in three years. What is the cost today of purchasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Cost of purchasing $ What is the cost today of leasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Cost of leasing S What break-even resale price in three years would make you indifferent between buying and leasing? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Break-even…

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