My daughter wants to buy a new car. Here are the parameters. The car cost $12,000 with terms of 5% APR over five years. She has $3000 saved up and is ready to put down on the loan. 1. What is the actual annual percentage rate she will be charged if she pays all of the $3000 as a down payment for the five years? What will her monthly payments be? 2. Would it be better (cheaper) for her to pay $1000 down now, borrowing the rest, but in 1 year pay the other $2000 put towards principal? How will this affect the loan?

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
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My daughter wants to buy a new car. Here are the parameters.
The car cost $12,000 with terms of 5% APR over five years. She has $3000 saved up and is ready
to put down on the loan.
1. What is the actual annual percentage rate she will be charged if she pays all of the
$3000 as a down payment for the five years? What will her monthly payments be?
2. Would it be better (cheaper) for her to pay $1000 down now, borrowing the rest, but in
1 year pay the other $2000 put towards principal? How will this affect the loan?
Transcribed Image Text:My daughter wants to buy a new car. Here are the parameters. The car cost $12,000 with terms of 5% APR over five years. She has $3000 saved up and is ready to put down on the loan. 1. What is the actual annual percentage rate she will be charged if she pays all of the $3000 as a down payment for the five years? What will her monthly payments be? 2. Would it be better (cheaper) for her to pay $1000 down now, borrowing the rest, but in 1 year pay the other $2000 put towards principal? How will this affect the loan?
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