A BMW is a statement car for any MBA, especially the 328 model, which you find i

Question

A BMW is a statement car for any MBA, especially the 328 model, which you find is priced around $42,650. There is an advertisement from Manhattan BMW in the New York Times offering the car with 0% financing with monthly payments of $724.50, at the end of each month for 5 years, based on $4,500 down at signing. a. Is the advertising of 0% financing accurate? Explain. b. If it is not, then what is the finance rate they are applying? please answer it on the fiancee calculator with the wright answer

Explanation / Answer

Solution -

Thus the advertising of 0% financing is not accurate as we land up paying more amount than the actual price which is the interest component

Now that 4,500 is paid as down at signing we have Principal P = 38150 ( 42650 - 4500 ) & Interest Paid as

5320 (43470 - 38150 ) we cl calculate the Interest rate using the below function

Rate ( Nper, PMT, PV )

where Nper is total number of EMI, PMT = EMI Amount, PV = Principal

Rate ( 60, 724.5 , 38150 )

0.44 % monthly or 0.44 % x 12 ie 5.26 % Per annum

Secondly we can solve the equation to get the Interest rate

Where P - Principal, r = rate of Interest, n = Number of Period,

Price of the Car 42,650 EMI 724.5 Tenure 60 Total of EMI 43470 DownPayment 4500 Total Amount to be paid including interest 47970

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