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 cashback 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 $30,000. 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 $3,000 rebate on the purchase price. If you take the rebate, you will have to go to the local bank for a loan (of $27,000) at an APR of 6.5%. Should you take the dealer financing or the rebate? (Assume you take the deal that saves you the most money.) How much would you save over the life of the loan by taking the option you chose? (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 cashback 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 $30,000. 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 $3,000 rebate on the purchase price. If you take the rebate, you will have to go to the local bank for a loan (of $27,000) at an APR of 6.5%. Should you take the dealer financing or the rebate? (Assume you take the deal that saves you the most money.) How much would you save over the life of the loan by taking the option you chose? (Round your answer to the nearest cent.) $

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

See similar textbooks

Related questions

Q: You are selling your car and the dealership says to you, "we can either give you $15,000 today or we…

A: Solution:- When an amount is borrowed, it can either be repaid as a lump sum payment or in…

Q: You just took out a variable-interest-rate consumer loan set at 33 percent over prime. After 1…

A: The objective of the question is to calculate the new interest rate on a variable-interest-rate…

Q: You are repaying a loan of ${A} by making payments at the end of every quarter for {B} years.…

A: Here, Loan Amount (A) $ 54,000.00Time Period in years (B)5Interest Rate ©2.15%Compounding Period…

Q: If you borrow $5000 at an APR of r (as a decimal) from a lending institution that compounds interest…

A: Interest rate is the proportion of amount loaned on which a lender charger as interest to the…

Q: "Zero percent financing" means the obvious thing-that no interest is belng charged on the loan. So…

A: Here, Price of truck = $10,000 Time period = 2 years Rate of interest for dealer financing = 0% Rate…

Q: Use Excel to answer this question: You want to borrow money from your bank to purchase a car. The…

A: Amount you can borrow = Present value of the maximum monthly paymentsNOTE :here the monthly payment…

Q: Which results in a lower total interest charge, borrowing $1,290 to be repaid 12 months later as…

A: Interest is an extra cost which is paid on the borrowed amount for the period. It increases the…

Q: A payday loan company charges a $85 fee for a $500 payday loan that will be repaid in 14 days.…

A: Payday loan is a type of short term borrowing. This loan is based on the income of the borrower and…

Q: 1) You are planning on buying a car and see that Toyota is advertising a promotional borrowing rate…

A: Cost of car = $24625Upfront cost if financed = $2000Time to pay the remaining amount = 2…

Q: magine you have a credit card balance of $1,000 that you would like to pay off within one year. The…

A: The credits cards are settled on the monthly payments and are paid by monthly payments and these…

Q: Suppose you borrow $29 thousand for 54 months to purchase a car. The loan has a rate of 7% with…

A: Information Provided: Loan amount = 29,000 Loan period = 54 months Interest rat e= 7% with…

Q: According to a Jan. 19, 2015 article in the New York Times, a typical payday loan for $500 is paid…

A: The concept of TVM states that money inherently has interest-earning capacity because of which an…

Q: Rounding in the calculation of monthly interest rates is discouraged. Such rounding can lead to…

A: Interest: It is the compensation paid to the lender by the borrower for taking the loan. It is paid…

Q: COMPARING INTEREST COST. You currently have a credit card that charges 18.99% interest. You receive…

A: Answer:- Interest cost meaning:- Interest cost is the overall sum of interest payments a borrower…

Q: has an all-cash credit policy. It is considering making a change in the credit p turn will be…

A: Net present value = Present value of credit policy - Present value of current policy

Question

1. 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 cashback 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 $30,000. 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 $3,000 rebate on the purchase price. If you take the rebate, you will have to go to the local bank for a loan (of $27,000) at an APR of 6.5%. Should you take the dealer financing or the rebate? (Assume you take the deal that saves you the most money.) How much would you save over the life of the loan by taking the option you chose? (Round your answer to the nearest cent.) $

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

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 $10,000. 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 $1,000 rebate on the purchase price. If you take the rebate, you wilIl have to go to the local bank for a loan (of $9,000) at an APR of 6.5%. Should you take the dealer financing or the rebate? (Assume you take the deal that saves you the most money.) dealer financing rebate How much would you save over the life of the loan by taking the option you chose? (Round…
Rounding in the calculation of monthly interest rates is discouraged. Such rounding can lead to answers different from those presented here. For long-term loans, the differences may be pronounced.To buy a car, you borrow $25,000 with a term of five years at an APR of 6%. What is your monthly payment? (Round your answer to the nearest cent.)$ How much total interest is paid? (Round your answer to the nearest cent.)
We charge $2,100 on a credit card with an annual interest rate of 18% and for which the minimum payment is $10 or 2.5% of the balance remaining to be paid, whichever is higher. How long will it take to repay the debt assuming that the minimum payment is always made, and how much will we have paid in total? If we borrow the same $2,100 at the same annual interest rate of 18% but repay it as an amortized loan with a monthly payment of $55, how long will it take to repay the debt, and how much will we have paid in total?.
To make Auto loan look more attractive than they really are, some banks advertise that their rates are higher than their competitor’s rates; however, the some automotive companies says that their rate is a simple interest rate. If a person deposits Php 80 000 at 12 % per year simple interest, what compound interest rate would yield the same amount of money in 3 years? a. 8.03 % per year b. 10.79 % per year c. 7.71 % per year d. 9.13 % per year
The time value of money is used for many important financial decisions that could affect long-term goals. The interest rate you pay on a loan can affect the amount you pay each period. An advertised monthly lending rate of 9% is about 11% per year. This difference between an advertised rate and the annualized rate is based on finer TVM details that may be overlooked by borrowers. What practical TVM application would you expect to encounter in your future? Explain.
Please answer fast I will rate for you sure....
Use Excel to answer this question: You want to borrow money from your bank to purchase a car. The maximum amount you are willing to pay is $450 per month. How much can you borrow if the loan lasts for 7 years, your first payment starts today, and the interest rate is 4.5% APR under monthly compounding? $32,495.13 O$29,489.45 O $31,576.98 O $27,456.87
FINCORP has two debtors who each make a $10, 000 purchase. Debtor 1 pays their account in 10 days, while debtor 2 pays in 30 days. a) In simple terms, what nominal annual interest rate is debtor 2 incurring for the benefit of delaying payment? Note: base your answer on the following logic. If a borrower pays 3% for a 30-day loan, we could express the nominal annual rate as roughly 36.5% i.e 3% x 365/30 = 36.5% that payment is due within 30 days but debtors will receive a 5 percent discount if they pay within 14 days. I'm quite unsure if that 5% as it is a discount, is handy or the steps to calculate the nominal interest rate
Suppose Capital One is advertising a 60-month, 5.42% APR motorcycle loan. If you need to borrow $8,000 to purchase your dream Harley-Davidson, what will be your monthly payment? (Note: Be careful not to round any intermediate steps less than six decimal places.) Your monthly payment will be $____. (Round to the nearest cent.)
Use the appropriate function(s) in Excel to answer the following questions. How much would your monthly payment be on a 3-year loan if the following assumptions were true? You borrowed $7,400. The fixed APR on the loan is 3.2%. Note: A fixed APR is an annual interest rate that does not change during the 3-year period. You will make equal monthly payments to repay both the loan amount and the monthly interest charges. You want to completely pay off the loan in exactly 3 years. (Round to the nearest cent, do not include a negative sign) Note: while this money is "leaving your wallet" the negative sign should not be included in the numeric answer because it is already implied by the word "payment" What is the total amount that you would pay to the bank over this 3-year period? Hint: Be sure to use your rounded answer from the previous step in the calculation of this answer. (Round to the nearest cent, do not include a negative sign) How much total interest would you have paid…
You need to borrow $10,000 right now but can repay the loan in 6 months. Since you want to pay as little interest as possible, which type of loan should you take? (A or B) A. discounted loan at 9% per annum B. simple interest loan at 10% per annum