Assume the car can be purchased for 0% down for 60 months (in lieu of rebate). A

Question

Assume the car can be purchased for 0% down for 60 months (in lieu of rebate). A car with a sticker price of $42,950 with factory and dealer rebates of $5,100 (a) Find the monthly payment if financed for 60 months at 0% APR. (Round your answer to the nearest cent.) $ (b) Find the monthly payment if financed at 2.5% add-on interest for 60 months. (Round your answer to the nearest cent.) $ (c) Use the APR approximation formula to find the APR for part (b). (Round your answer to one decimal place.) % (d) State whether the 0% APR or the 2.5% add-on rate should be preferred. 0% APR 2.5% add-on rate

Explanation / Answer

a) Monthly payment = (42950 - 5100)/60 = $630.83

b) Monthly payment = {(42950 - 5100)(1 + 0.025/12)^60 }/60 (assuming monthly compounding)

Monthly payment = $714.73

c) APR = { (42950 - 5100)/60 }/ 714.73 = 88.3%

d) 0% APR = 100% Thus, 0% APR should be preffered.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.