Alice wanted to purchase a new car for $18,400. A dealer offered her financing through a local bank at an interest rate of 13.5% compounded monthly. The dealer's financing required a 10% down payment and 48 equal monthly payments. Because the interest rate is rather high, Alice checked with her credit union for other possible financing options. The loan officer at the credit union quoted her 10.5% interest for a new-car loan and 12.25% for a used-car loan. But to be eligible for the loan, Alice had to have been a member of the credit union for at least six months. Since she joined the credit union two months ago, she has to wait four more months to apply for the loan. Alice decides to go ahead with the dealer's financing and 4 months later refinances the balance through the credit union at an interest rate of 12.25% (because the car is no longer new). a)Compute the monthly payment to the dealer b)Compute the monthly payment to the credit union c)What is the total interest payment for each loan transaction

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
Question
Please correct answer and don't use hand raiting
Alice wanted to purchase a new car for $18,400. A dealer
offered her financing through a local bank at an interest rate of
13.5% compounded monthly. The dealer's financing required a
10% down payment and 48 equal monthly payments. Because
the interest rate is rather high, Alice checked with her credit
union for other possible financing options. The loan officer at
the credit union quoted her 10.5% interest for a new-car loan
and 12.25% for a used-car loan. But to be eligible for the loan,
Alice had to have been a member of the credit union for at least
six months. Since she joined the credit union two months ago,
she has to wait four more months to apply for the loan. Alice
decides to go ahead with the dealer's financing and 4 months
later refinances the balance through the credit union at an
interest rate of 12.25% (because the car is no longer new).
a)Compute the monthly payment to the dealer
b)Compute the monthly payment to the credit union
c)What is the total interest payment for each loan transaction
Transcribed Image Text:Alice wanted to purchase a new car for $18,400. A dealer offered her financing through a local bank at an interest rate of 13.5% compounded monthly. The dealer's financing required a 10% down payment and 48 equal monthly payments. Because the interest rate is rather high, Alice checked with her credit union for other possible financing options. The loan officer at the credit union quoted her 10.5% interest for a new-car loan and 12.25% for a used-car loan. But to be eligible for the loan, Alice had to have been a member of the credit union for at least six months. Since she joined the credit union two months ago, she has to wait four more months to apply for the loan. Alice decides to go ahead with the dealer's financing and 4 months later refinances the balance through the credit union at an interest rate of 12.25% (because the car is no longer new). a)Compute the monthly payment to the dealer b)Compute the monthly payment to the credit union c)What is the total interest payment for each loan transaction
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