1
answer
0
watching
125
views
28 Sep 2019
Two alternatives are being considered to finance the acquisition ofa new vehicle. The purchase price is assumed $20,000 for allscenarios. (no discount for "cash" purchase). The investor'sminimum rate of return is a nominal 10.0% compounded monthly.
Alternative A is to accept the dealer finance package whichincludes a nominal 6.5% interest rate based on "add on" or "flat"compounding. A down payment equal to 20% of purchase price isrequired and the loan payments are spread out uniformly over months1-36.
Alternative B is to finance the acquisition through a bank at anannual percentage rate of 9% compounded monthly (normal compoundinterest). A down payment of 20% is required and the monthly loanpayments are uniform over the months 1 through 36.
1) Based on the monthly payments, which alternative would youselect?
Two alternatives are being considered to finance the acquisition ofa new vehicle. The purchase price is assumed $20,000 for allscenarios. (no discount for "cash" purchase). The investor'sminimum rate of return is a nominal 10.0% compounded monthly.
Alternative A is to accept the dealer finance package whichincludes a nominal 6.5% interest rate based on "add on" or "flat"compounding. A down payment equal to 20% of purchase price isrequired and the loan payments are spread out uniformly over months1-36.
Alternative B is to finance the acquisition through a bank at anannual percentage rate of 9% compounded monthly (normal compoundinterest). A down payment of 20% is required and the monthly loanpayments are uniform over the months 1 through 36.
1) Based on the monthly payments, which alternative would youselect?
Alternative A is to accept the dealer finance package whichincludes a nominal 6.5% interest rate based on "add on" or "flat"compounding. A down payment equal to 20% of purchase price isrequired and the loan payments are spread out uniformly over months1-36.
Alternative B is to finance the acquisition through a bank at anannual percentage rate of 9% compounded monthly (normal compoundinterest). A down payment of 20% is required and the monthly loanpayments are uniform over the months 1 through 36.
1) Based on the monthly payments, which alternative would youselect?
1
answer
0
watching
125
views
For unlimited access to Homework Help, a Homework+ subscription is required.
Kelleb MloyiLv2
28 Sep 2019