You are considering buying a car (sticker price of $43,000) but need financing. The car dealership has offered you two loan options: Loan A requires a $1,750 downpayment with the remainder financed over 5 years with monthly payments based on a contractual rate of interest of 4.1%; Loan B requires no downpayment with the balance financed at zero percent over 4 years with monthly payments. If you opt for Loan A you are eligible for an immediate $3,000 rebate on the car, no rebate is offered on the zero percent financing deal. The market rate for the risks that you pose is 7.1%. The car has a market value of $36,000. Assume you have chosen Loan A and would like to pay it off three years into the transaction. How much would you have to pay to retire the debt? [Don't round interim calculations] Multiple Choice C O $15,756.18 $16.244.96 $17,465.14 $23,882.16 None of the above

You are considering buying a car (sticker price of $43,000) but need financing. The car dealership has offered you two loan options: Loan A requires a $1,750 downpayment with the remainder financed over 5 years with monthly payments based on a contractual rate of interest of 4.1%; Loan B requires no downpayment with the balance financed at zero percent over 4 years with monthly payments. If you opt for Loan A you are eligible for an immediate $3,000 rebate on the car, no rebate is offered on the zero percent financing deal. The market rate for the risks that you pose is 7.1%. The car has a market value of $36,000. Assume you have chosen Loan A and would like to pay it off three years into the transaction. How much would you have to pay to retire the debt? [Don't round interim calculations] Multiple Choice C O $15,756.18 $16.244.96 $17,465.14 $23,882.16 None of the above

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter17: Accounting For Notes And Interest

Section: Chapter Questions

Problem 1MYW

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You are considering buying a car (sticker price of $43,000) but need financing. The car dealership has offered you two loan options: Loan A requires a $1,750 downpayment with the remainder financed over 5 years with monthly payments based on a contractual rate of interest of 4.1%; Loan B requires no downpayment with the balance financed at zero percent over 4 years with monthly payments. If you opt for Loan A you are eligible for an immediate $3,000 rebate on the car; no rebate is offered on the zero percent financing deal. The market rate for the risks that you pose is 7.1%. The car has a market value of $36,000. Assume you have chosen Loan A. How much interest do you pay in the second year of the loan? [Don't round interim calculations] Multiple Choice $7,330.92 $5,460.18 $1,142.99 $2,524.12 None of the above
You are considering buying a car (sticker price of $43,000) but need financing. The car dealership has offered you two loan options: Loan A requires a $1,750 downpayment with the remainder financed over 5 years with monthly payments based on a contractual rate of interest of 4.1%; Loan B requires no downpayment with the balance financed at zero percent over 4 years with monthly payments. If you opt for Loan A you are eligible for an immediate $3,000 rebate on the car; no rebate is offered on the zero percent financing deal. The market rate for the risks that you pose is 7.1%. The car has a market value of $36,000. How much value do you destroy with Loan B? [Don't round interim calculations] Multiple Choice $0.00 $3,596.89 $1,337.80 $7,000.00 $2,433.11
You are considering purchasing a car with a sticker price of $50,000 (nonnegotiable with no down payment required). You wish to make monthly payments for five years and the most you can afford to pay is $1,200 a month. The credit union has agreed to loan you the money at a 7% annual interest rate. Create an amoritization table for the amount the bank wants you to pay and another table for the amount we can actually afford of $1,200.
You are buying a new car, and you plan to finance your purchase with a loan you will repay over 48 months. The car dealer offers two options: either dealer financing with a low APR, or a $2500 rebate on the purchase price. If you use dealer financing, you will borrow $13,000 at an APR of 3.9%. If you take the rebate, you will reduce the amount you borrow to $10,500, but you will have to go to the local bank for a loan at an APR of 8.87%. To answer the first question below, you may need the following formula, where M is your monthly payment, in dollars, if you borrow P dollars with a term of 48 months at a monthly interest rate of r (as a decimal), and r = APR/12. M = Pr(1 + r)48 (1 + r)48 − 1 Should you take the dealer financing or the rebate? dealer financingrebate     How much will you save over the life of the loan by taking the option you chose? (Round your answer to the nearest cent.)$
You are interested in purchasing an automobile but you require financing. The dealer has provided you with several loan options to finance the purchase. Your market rate of return for the risk that you pose various lenders is 7%;    The automobile that you want to purchase has a sticker price of $35,000 and a competitive market value of $31,000.    Here are your loan options Loan 1:   loan has a term of 60 months, a contractual rate of interest of 8% and requires a down payment of $1500 for the purchase of the car. The loan allows you to claim a rebate of $1000 on the car at purchase. Loan 2:   The loan has a term of 72 months, a contractual rate of 7.5% and requires a down payment of $1000 for the purchase of the car.   The loan allows you to claim a $500 rebate Loan 3:   The loan has a term of 36 months a contractual interest rate of 0% and requires $4000 down.   No rebate is available for this option. If you chose loan 1, and decide to pay the loan off early (after you've made…
You are interested in purchasing an automobile but you require financing. The dealer has provided you with several loan options to finance the purchase. Your market rate of return for the risk that you pose various lenders is 7%;    The automobile that you want to purchase has a sticker price of $35,000 and a competitive market value of $31,000.    Here are your loan options Loan 1:   loan has a term of 60 months, a contractual rate of interest of 8% and requires a down payment of $1500 for the purchase of the car. The loan allows you to claim a rebate of $1000 on the car at purchase. Loan 2:   The loan has a term of 72 months, a contractual rate of 7.5% and requires a down payment of $500 for the purchase of the car.   The loan allows you to claim a $500 rebate Loan 3:   The loan has a term of 36 months a contractual interest rate of 0% and requires $4000 down.   No rebate is available for this option.   What is the monthly payment for loan 2 (rounded to the nearest whole…
Assume that you are on your way to purchase a new car. You have already applied and been accepted for an automobile loan through your local credit union. The loan can be for an amount up to $25,000, depending on the final price of the car you choose. The terms of the loan call for monthly payments for a period of four years at a stated interest rate equal to 6 percent. After selecting the car you want, you negotiate with the sales representative and agree on a purchase price of $24,000, which does not include any rebates or incentives. The rebate on the car you 24 chose is $3,000. The dealer offers “0% financing,” but you forfeit the $3,000 rebate if you take the “0% financing.” a. What are the monthly payments that you will have to make if you take the “0% financing”? (Hint: Because there is no interest, the total amount that has to be repaid is $24,000, which also equals the sum of all the payments.) b. What are the monthly payments if you finance the car with the credit union loan?…
You are interested in purchasing an automobile but you require financing. The dealer has provided you with several loan options to finance the purchase. Your market rate of return for the risk that you pose various lenders is 7%. The automobile that you want to purchase has a sticker price of $35,000 and a competitive market value of $31,000. Here are your loan options: Loan 1: loan has a term of 60 months, a contractual rate of interest of 8% and requires a down payment of $1,500 for the purchase of the car. The loan allows you to claim a rebate of $1,000 on the car at purchase. Loan 2: The loan has a term of 72 months, a contractual rate of 7.5% and requires a down payment of $1,000 for the purchase of the car. The loan allows you to claim a $500 rebate. Loan 3: The loan has a term of 36 months a contractual interest rate of 0% and requires $4,000 down. No rebate is available for this option. What is the value created or value destroyed for Loan 3 (round to the nearest…
You need to purchase a car, but don’t have the money to buy it outright. Therefore, you’ll have to borrow money for a loan. Your current situation is this:• The car you want to buy costs $11,999• You have $5500 saved for a down payment on the car.• The dealer offers add-on interest loans for 7% per year, for 1, 3, or 5 years.• You want to keep your car payments under $250 per month.(a) Calculate the monthly payments for 1, 3, or 5 years. Can you afford any of these loan terms?Explain.(b) Compute the total interest you’ll pay over the life of each loan
After deciding to buy a new car, you can either lease the car or purchase it on a three-year loan. The car you wish to buy costs $35,000. The dealer has a special leasing arrangement where you pay $99 today and $499 per month for the next three years. If you purchase the car, you will pay it off in monthly payments over the next three years at a 6% APR. You believe you will be able to sell the car for $23,000 in three years. All final answers are rounded to the nearest dollar. Choose all correct statements from the below. Question 6 options: If you sell the car after three years, the PV of purchasing the car is $15,780. Purchasing is always preferable if the APR is below 6%. The PV of leasing the car is $17,502. If the APR increases to 8.4%, you should lease the car. You should lease the car given that the PV of leasing is higher.
You are planning to buy an used car from a local dealer. The list price of the car is $12,000. If you pay cash, the cost of car is $11,000. The dealer also offers you the choice of paying $5,500 down with 3 equal year-end payment of $2,100. You have $5,500 cash. If you prefer, you can borrow the rest from your bank with a personal loan of 10% interest rate. What is the dealer's implied interest rate? Do you accept the dealer credit sale or borrow from the bank? List price of car Downpayment Cash cost of car Bank rate of interest Year 0 1 2 3 12,000 5,500 11,000 10% Payment in cash -11,000 0 0 0 Payment with credit -5,500 -2,100 -2,100 -2,100 Cash spent or saved with credit plan 5,500 -2,100 -2,100 -2,100
After deciding to buy a new car, you can either lease the car or purchase it on a three- year loan. The car you wish to buy costs $35,000. The dealer has a special leasing arrangement where you pay $99 today and $499 per month for the next three years. If you purchase the car, you will pay it off in monthly payments over the next three years at a 6 percent APR. You believe you will be able to sell the car for $23,000 in three years. What break-even resale price in three years would make you indifferent between buying and leasing? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Break-even sale price What is the present value of purchasing the car? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) $ Present value