Vin decides he wants a brand new sports car to race. He has just taken out an $90,000 loan to purchase the car. ? a. The bank will allow him to pay the loan off in 10 years after he has made enough money from his competitions using one of the following two options: Option A) 9.6 %/a compounded monthly Option B) 9.7 %/a compounded semi-annually i) Which option is better? ii) How much does he save with the better option? b. If Vin is able to put $15,000 down on the car and pay back the loan in 6 years, the bank will reduce the interest rate to 9%/a compounded annually. How much money would he save if he put a down payment on the car? (Compare it to the better option in a.)
Vin decides he wants a brand new sports car to race. He has just taken out an $90,000 loan to purchase the car. ? a. The bank will allow him to pay the loan off in 10 years after he has made enough money from his competitions using one of the following two options: Option A) 9.6 %/a compounded monthly Option B) 9.7 %/a compounded semi-annually i) Which option is better? ii) How much does he save with the better option? b. If Vin is able to put $15,000 down on the car and pay back the loan in 6 years, the bank will reduce the interest rate to 9%/a compounded annually. How much money would he save if he put a down payment on the car? (Compare it to the better option in a.)
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:Vin decides he wants a brand new sports car to race. He has just taken out an $90,000 loan to purchase
the car
a. The bank will allow him to pay the loan off in 10 years after he has made enough money from his
competitions using one of the following two options:
Option A) 9.6%/a compounded monthly
Option B) 9.7 %/a compounded semi-annually
i) Which option is better?
A
ii) How much does he save with the better option?
b. If Vin is able to put $15,000 down on the car and pay back the loan in 6 years, the bank will reduce
the interest rate to 9%/a compounded annually. How much money would he save if he put a down
payment on the car? (Compare it to the better option in a.)
A
e. Unfortunately Vin doesn't have $15000 night now. However, he does have $10000. If he invests this
money into a high interest savings account that pays 10.4%/a compounded weekly, how long will it
take him to be able to afford the down payment (in weeks)
If needed, use the TVM solver found here TVM Solve
Answer
A
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