E9-17 (Algo) Computing a Present Value Involving an Annuity and a Single Payment LO 9-7 You have decided to buy a used car. The dealer has offered you two options: (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use the appropriate factor(s) from the tables provided. a. Pay $690 per month for 25 months and an additional $12,000 at the end of 25 months. The dealer is charging an annual in rate of 24 percent. b. Make a one-time payment of $19,436, due when you purchase the car. Required: 1-a. Determine how much cash the dealer would charge in option (a). Note: Round your intermediate calculations and final answer to 2 decimal places. 1-b. In present value terms, which offer is a better deal?
E9-17 (Algo) Computing a Present Value Involving an Annuity and a Single Payment LO 9-7 You have decided to buy a used car. The dealer has offered you two options: (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use the appropriate factor(s) from the tables provided. a. Pay $690 per month for 25 months and an additional $12,000 at the end of 25 months. The dealer is charging an annual in rate of 24 percent. b. Make a one-time payment of $19,436, due when you purchase the car. Required: 1-a. Determine how much cash the dealer would charge in option (a). Note: Round your intermediate calculations and final answer to 2 decimal places. 1-b. In present value terms, which offer is a better deal?
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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Transcribed Image Text:E9-17 (Algo) Computing a Present Value Involving an Annuity and a Single Payment LO 9-7
You have decided to buy a used car. The dealer has offered you two options: (FV of $1, PV of $1, FVA of $1, and PVA of $1)
Note: Use the appropriate factor(s) from the tables provided.
a. Pay $690 per month for 25 months and an additional $12,000 at the end of 25 months. The dealer is charging an annual interest
rate of 24 percent.
b. Make a one-time payment of $19,436, due when you purchase the car.
Required:
1-a. Determine how much cash the dealer would charge in option (a).
Note: Round your intermediate calculations and final answer to 2 decimal places.
1-b. In present value terms, which offer is a better deal?
1-a. Present value
1-b. Which offer is a better deal?
× Answer is complete but not entirely correct.
$
Option b
25,471.19 X
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