Tracy wants to buy a new car. She is provided with two options by the dealership: $6,000 cash back or 0% financing for 60months on the $50,000 car that she wants to buy, Tracy determines that the cash back is the best option, as her alternativechoice is to borrow from the bank at 0.99% APR, compounded monthly, for 60 months. Prior to finalizing her choice, the bankcalls Tracy back and tells her that because of Federal Reserve rate hikes, the new interest rate at the bank is 5.99% APR. Withthis new interest rate, should Tracy reconsider her choice of the cash back option?O No, the value of the 0% financing decreases with the higher rate at the bankO Yes, the cash back option now has higher present valueO Yes, the value of the 0% financing increases with the higher rate at the bankO No, the cash back option now has lower present value

Cash value of car = $50,000Alternative 1: Getting CashbackIf Tracy wants to opt for cashback, she…

Answered: Tracy wants to buy a new car. She is…

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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Similar questions

Sarah negotiated a price of $24,800.00 for a new Toyota Camry Hybrid Sedan. She is prepared to give a down payment of 15%. Her credit union offered her a 5-year amortized loan for the remaining amount at a rate of 2.25%. How much money will be paid in interest? What will the monthly payment be? How much will the car cost, in total? If she got a simple interest loan at the same interest rate and time, how much would she pay in interest? $
Ms. Towne is buying a home for $250,000 and is putting down 20 percent cash on the purchase. She is financing the rest with a 30-year, fixed-rate mortgage with a rate of 5 percent but is considering an option that would allow her to make biweekly payments. How long would it take to pay off the loan if she chooses the biweekly payments option?
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After careful comparison shopping, Noah Griffin decides to buy a new Toyota Camry. With some options added, the car has a price of $23,610 - including plates and taxes. Because he can't afford to pay cash for the car, he will use some savings and his old car as a trade-in to put down $7,610. Noah plans to finance the rest with a $16,000, 60-month loan at a simple interest rate of 5 percent. What will his monthly payments be? Round the answer to the nearest cent. $ per month How much total interest will Noah pay in the first year of the loan? Round the answer to the nearest cent. (Use a monthly payment analysis procedure similar to the one in Exhibit 7.7.) $ How much interest will Noah pay over the full (60-month) life of the loan? Round the answer to the nearest cent. $ What is the APR on this loan? Round the answer to 2 decimal places. %
You decide to do some remodeling in the kitchen. Your parents agree to lend you the money, but you insist on paying them interest. The agreement is that they will lend you $8000.00 at a simple interest rate of 2% per year. Once the interest amounts to $480, you agree to pay them back the $8000 plus the $480 interest. After how many months will you have to pay them back? Please answer step by step
6) Susan is looking to purchase her first home five years from today. The house costs $1,550,000. She will have to make a down payment of 10% of this amount and plans to take a loan from the bank for the difference. Bank charges are approximately 15% of the loan amount. She plans to start saving from today to cover both the down payment and the bank charges. a. How much will she need to save to cover both the down payment and bank charges? b. If she currently has $195,000 in her account and will make no further deposits over the next five years, what rate of interest must she earn on this account in order to achieve the savings target calculated in part (a) above?
Addie wants to buy a car that is available at two dealerships. The price of the car is the same at both dealerships. Sams Motors would let her make quarterly payments of $7,500.00 for 6 years at a quarterly interest rate of 4.24 percent. Her first payment to Sams Motors would be due immediately. If Bolden Cars would let her make equal monthly payments of $3,500.00 at a monthly interest rate of 1.56 percent and if her first payment to Bolden Cars would be in 1 month, then how many monthly payments would Addie need to make to Bolden Cars? 17.90 (plus or minus 0.3 payments) O 47.21 (plus or minus 0.3 payments) 46.15 (plus or minus 0.3 payments) 17.58 (plus or minus 0.3 payments) 17.63 (plus or minus 0.3 payments)
Kerri James is considering the purchase of a car, which will cost her $24,600. She will borrow the entire purchase price and make monthly payments over the next six years. The first payment is due next month and the annual interest rate is 3.00%. She will owe $____ on the car immediately following the 18th payment. A. 18,858.19 B. 18,531.57 C. 20,757.33 D. 19,184.00 E. 23,258.56
Davadene has two student loans. one is for $8000 at an APR of 5% for 10 years; the second is for $15,000 at an interest rate of 6% for 12 years. Davadene is considering consolidating the loans and has found a bank that will loan her $23,000 for 8 years at an annual interest rate of 5.5%. If she is trying to pay off the loans and pay the least amount of interest, should Davadene take the consolidation option? Defend your answer.
Would Qualifying an Indorsement Be Ethical? Suppose you have taken a promissory note for $3,500 payable in 12 months with interest at 10 percent as payment for some carpentry work you did for a friend. You have some reason to believe the maker of the note is in financial difficulty and may not be able to pay the note when it is due. You discuss with an elderly neighbor the possibility of her buying the note from you as an investment, and she agrees to buy it from you for $3,000. Would it be ethical for you to indorse the note with a qualified indorsement ("without recourse")?
Kimberly Jensen of Storm Lake, Iowa, wants to buy some living room furniture for her new apartment. A local store offered credit at an APR of 16 percent, with a maximum term of four years. The furniture she wishes to purchase costs $3,600, with no down payment required. What are the total finance charges over that four-year period? Round your answer to the nearest dollar.
Hank has a $30,000.00 GIC which is locked in for the next 2 months at which time he can access his money. Today he was offered the opportunity to purchase his friends antique Harley Davidson motorcycle for $20,000.00 providing he can pay for it in the next few days or his friends is going to sell it on Kjiji. Hank really wants the motorcycle and has approached Everyday Bank about a loan noting that he can only afford a very small payment. What product would best meet Hank’s needs? a. A personal line of credit for $20,000.00 b. An interest only demand koan for $20,000.00 c. A fixed repayment Loan for $20,000.000 with a variable interest rate and fixed monthly payments. d. An Everyday Bank MasterCard with a limit of $20,000.00

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