Question

14 of 20 (12 complete) HV. Score: 0 of 1 pt 8.6.5 Suppose that you are...


14 of 20 (12 complete) HV. Score: 0 of 1 pt 8.6.5 Suppose that you are thinking about buying a car and have narrowed down you
14 of 20 (12 complete) HV. Score: 0 of 1 pt 8.6.5 Suppose that you are thinking about buying a car and have narrowed down your choices to two options The new car option: The new car costs $32,000 and can be financed with a five-year loan at 6.63%. The used car option: A three year old model of the same car costs $13,000 and can be financed with a five-year loan at 5.56%. What is the difference in monthly payments between financing the new car and financing the used car? Use PMT = The difference in monthly payments between financing the new car and financing the used car is $ (Round to the nearest cent as needed.) Enter your answer in the answer box and then click Check Answer. All parts showing Clear All QUITO arch
0 0
Add a comment Improve this question
Answer #1

annuity formula is

PMT = PV*(r/n)/(1 - (1+r/n)^(-n*t))

For option A

PMT = 32000*(0.0663/12)/(1 - (1+0.0663/12)^(-5*12)) = $628.07

For option B,

PMT = 13000*(0.0556/12)/(1 - (1+0.0556/12)^(-5*12)) = $248.68

difference between monthly payment = 628.07-248.68 = $379.39

Add a comment
Know the answer?
Add Answer to:
14 of 20 (12 complete) HV. Score: 0 of 1 pt 8.6.5 Suppose that you are...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • .6.5 Suppose that you are thinking about buying a car and have narrowed down your choices...

    .6.5 Suppose that you are thinking about buying a car and have narrowed down your choices to two options. The new-car option: The new car costs $31,000 and can be financed with a three-year loan at 7.63%. The used-car option: A three-year old model of the same car costs $14,000 and can be financed with a four-year loan at 7.25%. What is the difference in monthly payments between financing the new car and financing the used car? Use PMT=- -nt...

  • 8.6.5 Que Suppose that you are thinking about buying a car and have narrowed down your...

    8.6.5 Que Suppose that you are thinking about buying a car and have narrowed down your choices to two options The new-car option: The new car costs $25,000 and can be financed with a five-year loan at 6.12% The used car option: A three-year old model of the same car costs $17,000 and can be financed with a three-year loan at 6.417 What is the difference in monthly payments between financing the new car and financing the used car? Use...

  • 2. You are considering buying a new car from a local dealer (Dealer 1) for $30,000....

    2. You are considering buying a new car from a local dealer (Dealer 1) for $30,000. Dealer 1 will finance the entire purchase price at 6% interest over 5 years. Interest is compounded monthly and you must make monthly payments. What is the most you would be willing to offer another dealer (Dealer 2) for the same car who is offering a financing plan with a 2% interest rate over 5 years? Hint: If the loan payments are the same...

  • You have decided to acquire a new car that costs $30,000. You are considering whether to...

    You have decided to acquire a new car that costs $30,000. You are considering whether to lease it for three years or to purchase it and financing the purchase with a three-year installment loan. The lease requires no down payment and lasts for three years. Lease payments are $400 monthly starting immediately, whereas the installment loan will require monthly payments starting a month from now at an annual percentage rate (APR) of 8%. The discount rate (APR) is also 8%....

  • Score: 0 of 1 pt 3 of 10 (3 complete) HW Score: 296, 0.2 of 10...

    Score: 0 of 1 pt 3 of 10 (3 complete) HW Score: 296, 0.2 of 10 pts 3 P9-3 (similar to Question Help | * Before-tax cost of debt and after-tax cost of debt David Abbot is buying a new house, and he is taking out a 30-year mortgage David will borrow $200,000 from a bank, and payments on his a. What is the before-tax interest rate (per year) on David's loan? b. What is the after-tax interest rate that...

  • Please show work! You have decided to acquire a new car that costs $30,000. You are...

    Please show work! You have decided to acquire a new car that costs $30,000. You are considering whether to lease it for three years or to purchase it and financing the purchase with a three-year installment loan. The lease requires no down payment and lasts for three years. Lease payments are $400 monthly starting immediately, whereas the installment loan will require monthly payments starting a month from now at an annual percentage rate (APR) of 8%. The discount rate (APR)...

  • You decided to buy a new car, and you can either lease the car or purchase...

    You decided to buy a new car, and you can either lease the car or purchase it on a three- year loan. The car you wish to buy costs $32,000. The dealer has a special leasing arrangement where you pay $99 today and $450 per month for the next three years. If you purchase the car, you will pay it off in monthly payments over the next three years at a 7 percent APR. You believe you will be able...

  • You want to buy a new vehicle that costs $35,000. You have the option of taking...

    You want to buy a new vehicle that costs $35,000. You have the option of taking a $3,000 cash back and financing the remaining $32,000 with the dealership for 6% (Option A). The other option is to pay the full $35,000 for the vehicle with an annual financing charge of 1.5% (Option B). Both options allow repayment over 5 years on a monthly basis. Identify the total paid for the car (Option A and B) and the total interest that...

  • You are in the process of getting a new car priced at $24,000, but you are...

    You are in the process of getting a new car priced at $24,000, but you are not sure if you should lease it or buy it. Open a new Excel workbook. You could sell your current car for $4,000 and use the funds as a lease down payment, reducing the financed amount to $20,000. The lease would run for four years with an annual interest rate (APR) of 6%. At the end of the lease, the residual value (future value)...

  • Homework: Homework 4D - Loan Payments, Credit Cards, Mortga Save Score: 0 of 1 pt 7...

    Homework: Homework 4D - Loan Payments, Credit Cards, Mortga Save Score: 0 of 1 pt 7 of 10 (7 complete) HW Score: 55%, 5.5 of 10 pts 4.D.27 Question Help Someone needs to borrow $11,000 to buy a car and the person has determined that monthly payments of $250 are affordable. The bank offers a 3-year loan at 7% APR, a 4-year loan at 7.5%, or a 5-year loan at 8% APR. Which loan best meets the person's needs? Explain....

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT