You are shopping for a car and read the following advertisement in the newspaper: "Own a new Spitfire! No money down. Four annual payments of just $18,000." You have shopped around and know that you can buy a Spitfire for cash for $64,800. What is the interest rate the dealer is advertising (what is the rate that equates the PV of the payments to today's cash price of the car)? Assume that you must make the annual payments at the end of each year. The rate that equates the PV of the payments to today's cash price of the car is%. (Enter your response as a percent rounded to two decimal places.)

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
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You are shopping for a car and read the following advertisement in the newspaper:
"Own a new Spitfire! No money down. Four annual payments of just $18,000."
You have shopped around and know that you can buy a Spitfire for cash for $64,800. What is the interest rate the dealer is advertising (what is the rate that equates
the PV of the payments to today's cash price of the car)? Assume that you must make the annual payments at the end of each year.
C
The rate that equates the PV of the payments to today's cash price of the car is
%. (Enter your response as a percent rounded to two decimal places.)
Transcribed Image Text:You are shopping for a car and read the following advertisement in the newspaper: "Own a new Spitfire! No money down. Four annual payments of just $18,000." You have shopped around and know that you can buy a Spitfire for cash for $64,800. What is the interest rate the dealer is advertising (what is the rate that equates the PV of the payments to today's cash price of the car)? Assume that you must make the annual payments at the end of each year. C The rate that equates the PV of the payments to today's cash price of the car is %. (Enter your response as a percent rounded to two decimal places.)
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