You need a new car and the dealer has offered you a price of $20,000​, with the following payment​ options: (a) pay cash and receive a $2,000 ​rebate, or​ (b) pay a $5,000 down payment and finance the rest with a 0% APR loan over 30 months. But having just quit your job and started an MBA​ program, you are in debt and you expect to be in debt for at least the next 2​ ½ years. You plan to use credit cards to pay your​ expenses; luckily you have one with a low​ (fixed) rate of 15.49% APR. Which payment option is best for​ you? What is the monthly discount rate ______ For you, what is the present value of option​ (b) is $_______

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Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.