Billy Bob would like to purchase a new truck. The salesman has given BB 2 options for financing his truck. He can finance the $30,000 loan at 0% for 60 months, or he can receive a rebate amount and finance with his bank. He will apply the $2000 rebate and finance the difference if he finances with his bank. His bank is offering a rate of 5% for a 60 month loan. What is BB's payment if he takes the dealer's 0% offer? 30000 60 What is BB's payment if he applies the rebate to reduce the loan amount and finances with his bank? Loan amount; 28000 Rate & term; 0.05 60 What recommendation would you make to BB?
Billy Bob would like to purchase a new truck. The salesman has given BB 2 options for financing his truck. He can finance the $30,000 loan at 0% for 60 months, or he can receive a rebate amount and finance with his bank. He will apply the $2000 rebate and finance the difference if he finances with his bank. His bank is offering a rate of 5% for a 60 month loan. What is BB's payment if he takes the dealer's 0% offer? 30000 60 What is BB's payment if he applies the rebate to reduce the loan amount and finances with his bank? Loan amount; 28000 Rate & term; 0.05 60 What recommendation would you make to BB?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Mortgages
A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.
Mortgage
The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.
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Transcribed Image Text:Billy Bob would like to purchase a new truck. The salesman has given BB 2 options
for financing his truck. He can finance the $30,000 loan at 0% for 60 months, or he
4)
can receive a rebate amount and finance with his bank. He will apply the $2000
rebate and finance the difference if he finances with his bank.
His bank is offering a rate of 5% for a 60 month loan.
a)
What is BB's payment if he takes the dealer's 0% offer?
30000
60
b)
What is BB's payment if he applies the rebate to reduce the loan amount
and finances with his bank?
Loan amount;
28000 Rate & term;
0.05
60
c)
What recommendation would you make to BB?
d)
Would your recommendation change if BB said he was going to try and pay
the loan off within 1 year? If so, how so?
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