Denzel needs a new car. At the dealership, he finds the car that he likes. The d

Question

Denzel needs a new car. At the dealership, he finds the car that he likes. The dealership gives him two payment options: 1. Pay $31,500 for the car today. 2. Pay $3,300 at the end of each quarter for three years.

Assuming Denzel uses a discount rate of 8% (or 2% quarterly), calculate the present value. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answers to 2 decimal places.)

_________Present Value
Option1:__ ??
Option2:__??


Which option gives him the lower cost?
Option 1 or Option2 ?

Explanation / Answer

1)option 1 .payment = 31500

option 2 )payment = PVAF@ 2%, 12 * quarter payment

                           = 10.57534 * 3300

                           = $ 34898.63

2)option 1 ,gives lower payment

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