Personal Finance (MindTap Course List)
13th Edition
ISBN: 9781337099752
Author: E. Thomas Garman, Raymond Forgue
Publisher: Cengage Learning
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Question
Chapter 8, Problem 4DTM
Summary Introduction
Case summary: The Person KP is looking to purchase a new car where the person is in dilemma about financing decision. The person have two options either dealer finance can be done or loan from the bank can be taken. The person is looking for most appropriate and cost effective financing for new car.
Character in the case: Person KP
Adequate information:The price of the car model is $34,000. Dealer is offering rebate of $2500 at 2% APR along with down payment of $1000. Monthly payment will be $578 for 60 months. Bank is offering loan at 5% APR.
To determine: The most beneficial offer amongst dealer financing and bank loan.
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Kyle Parker of Concord, New Hampshire, has been shopping for a new car for several weeks. He has negotiated a price of $31,000 on a model that carries a choice of a $2,500 rebate or dealer financing at 2 percent APR. The dealer loan would require a $1,000 down payment and a monthly payment of $526 for 60 months. Kyle has also arranged for a loan from his bank with a 7 percent APR. Use the Run the Numbers worksheet to advise Kyle about whether he should use the dealer financing or take the rebate and use the financing from the bank. Round your answer to two decimal places.
Adjusted APR (dealer financing): %
Kyle should use -Select-the dealer financingthe financing from the bankItem 2 .
Bernie is looking to buy a riding lawn mower for $1320. The store offers a 3-year add-on loan using simple annual. Round to two decimal places and include appropriate units with all final answers.
If Bernie wants to pay $50 per month, what interest rate can he afford?
If they charge him an 18% interest rate, what down payment would he need to make in order to have a $50 monthly payment?
Billy Bob would like to purchase a new truck. The salesman has given BB 2 options for financing his truck. He can finance the $30,000 loan at 0% for 60 months, or he can receive a rebate amount and finance with his bank. He will apple the $2000 rebate and finance the difference if he finances with his bank. His bank is offering a rate of 5% for a 60 month loan.
a. What is BBs payment if he takes the dealers 0% offer ? (30000, 60)
b. what is BBs payment if he applies the rebate to reduce the loan amount and finances with his bank? (loan amount 28000, rate& term 0.05, 60)
Chapter 8 Solutions
Personal Finance (MindTap Course List)
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