1. You and the dealer have agreed upon the purchase price for a new automobile. The purchase price is $38,000. In addition, sales tax of $2,280, a documentation fee of $500 is added to you purchase price. You make an initial payment of $5,000 and seek to finance the remaining balance. Your automobile dealer has a finance opportunity which will allow you to defer your first payment for 6 months. Your car payments will be paid each monthly over a 3-year period beginning the first month after the 6 months deferral period. The interest rate is 6% per year for the duration of the loan and interest accrue monthly during the 6 months' deferral period. a. Draw the cash flow diagram from your perspective. b. What are your monthly payments? You decide to pay off your loan when you make your 24th payment. What will be your total 24th payment?
1. You and the dealer have agreed upon the purchase price for a new automobile. The purchase price is $38,000. In addition, sales tax of $2,280, a documentation fee of $500 is added to you purchase price. You make an initial payment of $5,000 and seek to finance the remaining balance. Your automobile dealer has a finance opportunity which will allow you to defer your first payment for 6 months. Your car payments will be paid each monthly over a 3-year period beginning the first month after the 6 months deferral period. The interest rate is 6% per year for the duration of the loan and interest accrue monthly during the 6 months' deferral period. a. Draw the cash flow diagram from your perspective. b. What are your monthly payments? You decide to pay off your loan when you make your 24th payment. What will be your total 24th payment?
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
Related questions
Question
1. You and the dealer have agreed upon the purchase price for a new automobile. The purchase price is $38,000. In addition, sales tax of $2,280, a documentation fee of $500 is added to you purchase price. You make an initial payment of $5,000 and seek to finance the remaining balance. Your automobile dealer has a finance opportunity which will allow you to defer your first payment for 6 months. Your car payments will be paid each monthly over a 3-year period beginning the first month after the 6 months deferral period. The interest rate is 6% per year for the duration of the loan and interest accrue monthly during the 6 months' deferral period.
a. Draw the cash flow diagram from your perspective.
b. What are your monthly payments?
You decide to pay off your loan when you make your 24th payment. What will be your total 24th payment?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education