A local used car dealer calculates its “4%” financing as follows. If $3600 is borrowed to be repaid over a 3-year period, the interest charge is ($3600)(0.04)(3 years) = $432. The $432 of interest is deducted from the $3600 loan and the customer has $3168 toward the cost of a car. The customer must repay the loan with 1/36 of $3600, or $100, monthly payments for 36 months. (a) What effective annual interest rate is being charged? (b) What is your view of the ethics of this loan calculation? Do you believe deception is involved? In what circumstances do you view deception as ethical?
A local used car dealer calculates its “4%” financing as follows. If $3600 is borrowed to be repaid over a 3-year period, the interest charge is ($3600)(0.04)(3 years) = $432. The $432 of interest is deducted from the $3600 loan and the customer has $3168 toward the cost of a car. The customer must repay the loan with 1/36 of $3600, or $100, monthly payments for 36 months. (a) What effective annual interest rate is being charged? (b) What is your view of the ethics of this loan calculation? Do you believe deception is involved? In what circumstances do you view deception as ethical?
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
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A local used car dealer calculates its “4%” financing as follows. If $3600 is borrowed to be repaid over a 3-year period, the interest charge is ($3600)(0.04)(3 years) = $432. The $432 of interest is deducted from the $3600 loan and the customer has $3168 toward the cost of a car. The customer must repay the loan with 1/36 of $3600, or $100, monthly payments for 36 months. (a) What effective annual interest rate is being charged? (b) What is your view of the ethics of this loan calculation? Do you believe deception is involved? In what circumstances do you view deception as ethical?
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