When interest rates are low, some automobile dealers offer loans at 0% APR, as indicated in a 2016 advertisement by a prominent car dealership, offering zero percent financing or cash back deals on some models. Zero percent financing means the obvious thing—that no interest is being charged on the loan. So if we borrow $1,200 at 0% interest and pay it off over 12 months, our monthly payment will be $1,200/12 = $100. Suppose you are buying a new truck at a price of $28,000. You plan to finance your purchase with a loan you will repay over two years. The dealer offers two options: either dealer financing with 0% interest, or a $2,800 rebate on the purchase price. If you take the rebate, you will have to go to the local bank for a loan (of $25,200) at an APR of 6.5%. What would your monthly payment be if you used dealer financing? (Round your answer to the nearest cent.)
When interest rates are low, some automobile dealers offer loans at 0% APR, as indicated in a 2016 advertisement by a prominent car dealership, offering zero percent financing or cash back deals on some models. Zero percent financing means the obvious thing—that no interest is being charged on the loan. So if we borrow $1,200 at 0% interest and pay it off over 12 months, our monthly payment will be $1,200/12 = $100. Suppose you are buying a new truck at a price of $28,000. You plan to finance your purchase with a loan you will repay over two years. The dealer offers two options: either dealer financing with 0% interest, or a $2,800 rebate on the purchase price. If you take the rebate, you will have to go to the local bank for a loan (of $25,200) at an APR of 6.5%. What would your monthly payment be if you used dealer financing? (Round your answer to the nearest cent.)
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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When interest rates are low, some automobile dealers offer loans at 0% APR, as indicated in a 2016 advertisement by a prominent car dealership, offering zero percent financing or cash back deals on some models.
Zero percent financing means the obvious thing—that no interest is being charged on the loan. So if we borrow $1,200 at 0% interest and pay it off over 12 months, our monthly payment will be $1,200/12 = $100.
Suppose you are buying a new truck at a price of $28,000. You plan to finance your purchase with a loan you will repay over two years. The dealer offers two options: either dealer financing with 0% interest, or a $2,800 rebate on the purchase price. If you take the rebate, you will have to go to the local bank for a loan (of $25,200) at an APR of 6.5%.
What would your monthly payment be if you used dealer financing? (Round your answer to the nearest cent.)
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Step 1
The dealer would charge a complete amount of the purchase in equal monthly installments with a 0% interest rate.
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