Question

You have just received an inheritance of $20,000.00. You need to go to school, buy a car for transportation, pay for living expenses per month and rent.
Option A:
- Pay the full tuition of $20,000.00 for 4 years
- Finance a car with ($20,000.00) at a rate of 4.5 % per year
- You need to pay a buying commission of 2.5 % which comes out of your inheritance
- *Rent is $1000.00 per month
- *Additional expenses $1000.00 per month
- *Rest of money owed from tuition

Option B:
- Pay (remainder of money) of tuition with the rest borrowed at 3 % per year
- Put down $10,000.00 on a car with the rest financed at 4.5 % per year
- You need to pay commission of 2.5 % (which needs to come from your inheritance)
- *Rent is $1000.00 per month
- *Additional expenses are $1000.00 per month

* = need a loan of 2 % per year


Which option is better? Explain.

Answer 1

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