Question

You have decided to buy a used car. The dealer has offered you two options: (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) Pay $520 per month for 30 months and an additional $10,000 at the end of 30 months. The dealer is charging an annual interest rate of 24%. Make a one-time payment of $17,167, due when you purchase the car.

Answer 1

Answer:

$17,167

Explanation:

The first step is to calculate amount of cash that would be charged

For 30 months, pay $520 per month for 30 months and an additional $10,000 at the end of 30 months.

Present value is = 2,221

Then

The present value of the payment options is =

($520 * PVA (24% 12,30) + $10,000 PV ( 24% 12,30))

$520 * 22.396 + $10,000 * 0.5521

$11646 + $ 5521

$17,167

Therefore the amount of cash the car dealer would charge is $17,167