Part I: You are considering the purchase of a new SUV for $47,484. You have saved $3,500 which you will use as a down payment for the purchase. You intend to finance the remaining cost of the SUV at 5% compounded monthly for 4 years. a. What is the monthly payment for this vehicle? b. How much of the 1st payment goes toward interest? c. How much of the 48th payment goes toward interest? d. What is the remaining balance on the loan at the end of the 3rd year? e. How much of the payments made during year 1 go toward repaying the principal? f. How much of the payments made during year 4 go toward repaying the principal? Part II: While finalizing the purchase of the SUV, your salesperson tells you about two incentive financing options that are available. Option 1: You can finance the purchase at 0.9% compounded monthly for 5 years and receive a $500 bonus cash back (added to your down payment) or Option 2: You can finance the purchase at 5% compounded monthly for 5 years and receive $2,500 bonus cash back (added to your down payment). g. What is the monthly payment if you choose Option 1? h. What is the monthly payment if you choose Option 2? i. Which of the three financing choices (Original, Option 1, or Option 2 would you choose? Explain your choice.
Part I: You are considering the purchase of a new SUV for $47,484. You have saved $3,500 which you will use as a down payment for the purchase. You intend to finance the remaining cost of the SUV at 5% compounded monthly for 4 years. a. What is the monthly payment for this vehicle? b. How much of the 1st payment goes toward interest? c. How much of the 48th payment goes toward interest? d. What is the remaining balance on the loan at the end of the 3rd year? e. How much of the payments made during year 1 go toward repaying the principal? f. How much of the payments made during year 4 go toward repaying the principal? Part II: While finalizing the purchase of the SUV, your salesperson tells you about two incentive financing options that are available. Option 1: You can finance the purchase at 0.9% compounded monthly for 5 years and receive a $500 bonus cash back (added to your down payment) or Option 2: You can finance the purchase at 5% compounded monthly for 5 years and receive $2,500 bonus cash back (added to your down payment). g. What is the monthly payment if you choose Option 1? h. What is the monthly payment if you choose Option 2? i. Which of the three financing choices (Original, Option 1, or Option 2 would you choose? Explain your choice.
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:Part I: You are considering the purchase of a new SUV for $47,484. You have saved $3,500 which you will use as a down payment for the purchase. You
intend to finance the remaining cost of the SUV at 5% compounded monthly for 4 years.
a. What is the monthly payment for this vehicle?
b. How much of the 1st payment goes toward interest?
c. How much of the 48th payment goes toward interest?
d. What is the remaining balance on the loan at the end of the 3rd year?
e. How much of the payments made during year 1 go toward repaying the principal?
f. How much of the payments made during year 4 go toward repaying the principal?
Part II: While finalizing the purchase of the SUV, your salesperson tells you about two incentive financing options that are available.
Option 1: You can finance the purchase at 0.9% compounded monthly for 5 years and receive a $500 bonus cash back (added to your down payment)
or
Option 2: You can finance the purchase at 5% compounded monthly for 5 years and receive $2,500 bonus cash back (added to your down payment).
g. What is the monthly payment if you choose Option 1?
h. What is the monthly payment if you choose Option 2?
i. Which of the three financing choices (Original, Option 1, or Option 2 would you choose? Explain your choice.
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