**Present Value Calculation**A smooth-talking used-car salesman is offering a great deal on a "pre-owned" car. He mentions, "For only 6 annual payments of $2,600, this beautiful 1998 Honda Civic can be yours." The scenario poses a question: If you can borrow money at 7%, what is the present price of this car? Assume that the payment is made at the end of each year.**Question:** If you can borrow money at 7%, what is the price of this car?**Solution Section:** Price: $____ (Round to the nearest cent.)**Explanation:**This task involves calculating the present value of a series of future payments. You need to consider the given interest rate and the timing of the payments to determine what the car is worth in today's dollars. This situation exemplifies a practical application of present value calculations typically addressed in finance courses.(Note: The image does not contain any graphs or diagrams, so there are no visual elements to describe further.)

Present Value of annuity refers to the present value of all the future payments of and series of…

Answered: Present value. A smooth-talking…

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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Similar questions

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.
Present value. A smooth-talking used-car salesman who smiles considerably is offering you a great deal on a "pre-owned" car. He says, "For only 8 annual payments of $2,600, this beautiful 1998 Honda Civic can be yours." If you can borrow money at 7%, what is the price of this car? Assume the payment is made at the end of each year. If you can borrow money at 7%, what is the price of this car? $nothing (Round to the nearest cent.)
Suppose you want to buy a car. You have surveyed the dealers' newspaper advertisements, and the one shown has caught your attention. You can afford to make a down payment of $2,678.95, so the net amount to be financed is $20,000.(a) What would the monthly payment be?(b) After the 25th payment, you want to pay off the remaining loan in a lumpsum amount. What is this lump sum?
Present value. A smooth-talking used-car salesman who smiles considerably is offering you a great deal on a "pre-owned" car. He says, "For only 8 annual payments of $2,600, this beautiful 1998 Honda Civic can be yours." If you can borrow money at 9%, what is the price of this car? Assume the payment is made at the end of each year. If you can borrow money at 9%, what is the price of this car?
Quantitative Problem: You need $14,000 to purchase a used car. Your wealthy uncle is willing to lend you the money as an amortized loan. He would like you to make annual payments for 4 years, with the first payment to be made one year from today. He requires a 9% annual return. a. What will be your annual loan payments? Do not round intermediate calculations. Round your answer to the nearest cent. b. How much of your first payment will be applied to interest and to principal repayment? Do not round intermediate calculations. Round your answers to the nearest cent. Interest: $ Principal repayment: $
Suppose you would like to purchase a new mustang GT. The sticker price of the mustang you want is $40000. The dealer is able to give you an APR of 4% for 5 years. How much will your monthly payments be?How much will you have paid in interest once the loan is paid off?
Suppose you can afford to pay $ 250 a month for 8 years towards a new car with no down payment. If the current interest rates are 4.75%, how expensive a car can you afford? Car sticker price =
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 4.8% 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 more or less (in dollars) is the present value of your car loan compared to the amount the dealer is offering? (Enter a number. Round your answer to the nearest cent.)
You are selling your car and the dealership says to you, "we can either give you $15,000 today or we can give you $5,000 per year starting one year from now for the next 4 years." At what interest rate are you indifferent? (i.e. what interest rate is being provided here?) Choose the closest. a) 18.8% b) 33.3% c) 12.6% d) 6.7%
Solve this question
Imagine that you are trying to evaluate the economics of purchasing an automobile. You expect the car to provide annual cash benefits of $1,200 at the end of each year, and assume that you can sell the car for proceeds of $5,000 at the end of the planned 5-year ownership period. All funds which are you use has 6% discount rate. What should be the required return applicable to valuing the car. Lütfen birini seçin: O a. 4% O b. 6% c. 5% O d. 7%
solve question c

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