Challenge question 1. Michael is shopping for a special automobile. He finds the exact car he wants, a 1966 dark blue Pontiac GTO. This car is currently the property of a neighbor, so to buy it for the agreed-upon price of $35,000, Michael must secure his own financing. He visits four differer financial institutions and gets the following available loans: Bank 1: 60 monthly payments of $726.54 Bank 2: 48 monthly payments of $870.97 Bank 3: 156 weekly payments of $256.20 (Assume a 52-week year.) Bank 4: 24 quarterly payments of $1,903.28 Which loan should Michael take? Hint: Which loan has the lowest EAR?
Challenge question 1. Michael is shopping for a special automobile. He finds the exact car he wants, a 1966 dark blue Pontiac GTO. This car is currently the property of a neighbor, so to buy it for the agreed-upon price of $35,000, Michael must secure his own financing. He visits four differer financial institutions and gets the following available loans: Bank 1: 60 monthly payments of $726.54 Bank 2: 48 monthly payments of $870.97 Bank 3: 156 weekly payments of $256.20 (Assume a 52-week year.) Bank 4: 24 quarterly payments of $1,903.28 Which loan should Michael take? Hint: Which loan has the lowest EAR?
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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Transcribed Image Text:Challenge question I. Michael is shopping for a special automobile. He finds the exact car he wants, a 1966 dark blue Pontiac GTO. This car is
currently the property of a neighbor, so to buy it for the agreed-upon price of $35,000, Michael must secure his own financing. He visits four different
financial institutions and gets the following available loans:
Bank 1: 60 monthly payments of $726.54
Bank 2: 48 monthly payments of $870.97
Bank 3: 156 weekly payments of $256.20 (Assume a 52-week year.)
Bank 4: 24 quarterly payments of $1,903.28
Which loan should Michael take? Hint: Which loan has the lowest EAR?
If Michael selects Bank 1 for the loan, what is the periodic interest rate on the loan?
% (Round to four decimal places.)
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