1 answer

Having been working for two years, Sarah has decided to purchase a car for daily commute...

Question:

Having been working for two years, Sarah has decided to purchase a car for daily commute and leisure. After hearing the advices and suggestions from friends and family, she has visited several auto dealerships, and chosen the new car she would like to purchase. She now wants to research her financing options to choose the best way to pay for the car. Sarah knows that with taxes, licence, delivery, and dealer preparation fees, the car will cost $27,650. She has $7500 from deposit account and $5000 from parents toward the purchase price but must borrow the rest. She has narrowed her financing choices to three options: dealer financing, credit union financing, and bank financing. (i) The car dealer has offered 48-month financing at 8.5% compounded monthly. (ii) The credit union has offered 36-month financing at 9% compounded quarterly. It has also offered 48-month financing at 9.3% compounded quarterly. (iii) The bank has offered 36-month financing at 8.8% compounded semi-annually. It has also offered 48-month financing at 9.1% compounded semi-annually. BUSI1003 Math for Business_Project 2 Sarah desires the financing option that offers the best interest rate. However, she also wants to explore the financing options that allow her to pay off her car loan more quickly. QUESTIONS 1. Sarah wants to compare the 48-month car loan options offered by the car dealer, the credit union, and the bank. (a) What is the effective annual rate of interest for each 48-month option? – 6 marks (b) How much interest will Sarah save by choosing the best option compared to the worst option? – 6 marks 2. Suppose Sarah wants to pay off her car loan within three years. (a) What is the effective annual rate of interest for both of the 36-month options? – 6 marks (b) How much interest will Sarah save by choosing the better option?


Answers

To Solve the given question you just need to apply the formula for effective annual interest rate i.e. (EAR)

Which is;

EAR (effective annual rate) = (1 + (nominal interest rate / number of compounding periods)) ^ (number of compounding periods) – 1

Check the below mentioned data for detailed solution.

Thanks1. (a) Calculation of effective annual interest rate for each 48-month option :- EAR (effective annual rate) (1 + (nominal in(b) Calculation of savings made by choosing best option over the worst option :- Since the EAR of car dealer is least it is t2. (a) Calculation of effective annual interest rate for each 36-month option :- EAR (effective annual rate) (1 + (nominal in(b) Calculation of savings made by choosing better option :- Since the EAR of Credit union is less than the Bank hence, Credi

.

Similar Solved Questions

1 answer
A 44-year-old Caucasian woman is admitted for local wide excision of a large mole that has...
A 44-year-old Caucasian woman is admitted for local wide excision of a large mole that has been diagnosed as malignant melanoma on her upper thigh. Her past history is negative for serious illness. She was hospitalized for the birth of her three children. She admits to being an avid sun worshipper&#...
1 answer
Most of the world’s businesses are: Sole traders MNEs TNCs SMEs
Most of the world’s businesses are: Sole traders MNEs TNCs SMEs...
1 answer
What's another way to reword these sentences? 1. Despite the fact that nurses strive their best...
What's another way to reword these sentences? 1. Despite the fact that nurses strive their best to give endless compassion and care, some nurses will undergo compassion fatigue. 2. Compassion fatigue is a condition that is the cumulative result of the authentic, firm, empathetic feelings experie...
2 answers
What are the fundamental differences between Western philosophies and Eastern ways of knowing
What are the fundamental differences between Western philosophies and Eastern ways of knowing? (Generally, how does each culture view the world and education?)...
1 answer
Both questuons please 8. Number problem-solve: (1) Jason works at Firestone Auto. He can complete 30...
both questuons please 8. Number problem-solve: (1) Jason works at Firestone Auto. He can complete 30 Oil changes a day or replace 6 Brake pads a day. What is his opportunity cost" of 1 Brake Pad? [Give a number answer.) 9. Written example: (2) write a short example of an "opportunity cost...
1 answer
Q1. Which of the following apply to cellular respiration? (Select ALL that apply.) A. Cellular respiration...
Q1. Which of the following apply to cellular respiration? (Select ALL that apply.) A. Cellular respiration uses sunlight to convert low energy carbon dioxide into high energy sugar molecules. B. Cellular respiration breaks down high energy sugars thereby releasing energy for the cell to do work. C. ...
1 answer
Please Solve Both Parts of problem and include step by step clear explanation. will rate! 2a....
Please Solve Both Parts of problem and include step by step clear explanation. will rate! 2a. Solve the initial value problem y = 3y + 2, YO) = 3. 2b. Determine equilibrium solutions and their type for y = y + 2y - 8y. Sketch a phase line diagram. o=y4+243 82...
1 answer
19.2 Make a truth table for the following logic relations. a. (a b)(a-b) b, (a +...
19.2 Make a truth table for the following logic relations. a. (a b)(a-b) b, (a + b+c)( а + b + c)(b + c)...
1 answer
17-26 true or false questions 17. The smallest positive real number is c, where c = card(0,1). 18. To show that two sets A and B are equal, show that x A and x B. 19. If (vx)P(e) is false, then P...
17-26 true or false questions 17. The smallest positive real number is c, where c = card(0,1). 18. To show that two sets A and B are equal, show that x A and x B. 19. If (vx)P(e) is false, then P(x) is never true for that domain. 20. If R is a relation on A and if (a, a) is true for some a in A,...
1 answer
5. Probabilities associated with pedestrian-vehicle collisions are shown in the table below. Let A denote the...
5. Probabilities associated with pedestrian-vehicle collisions are shown in the table below. Let A denote the event that a driver was speeding. The B denote the event that a pedestrian was in a crosswalk. Pedestrian In CrosswalkPedestrian Not in Crosswalk A Driver Speeding 0.39 0.19 Driver Not Speed...
1 answer
Cost Functions of a Firm $2,500 $2,280 - $2,250 - $1,980 $2,000 $1,608 $1,680 $1,750 $1,380...
Cost Functions of a Firm $2,500 $2,280 - $2,250 - $1,980 $2,000 $1,608 $1,680 $1,750 $1,380 $1,200 $1,500 $1,342 $1,251 $1,200 $1,250 $1,248 $1,000 L $1,200 $840 - $660 $750 $480 - $120 $500 $607 $120 $240 $250 $240 0 1 2 3 4 8 9 10 11 12 5 6 7 Output Produced (q) Question 3 1 pts Consider the infor...
1 answer
This needs to be coded for diagnosis for ICD-CM-10. There are nine separate codes needed for...
This needs to be coded for diagnosis for ICD-CM-10. There are nine separate codes needed for the correct answer. HILLSIDE HOSPITAL 359 Mountain Pass Road Langston, FL 33993 DISCHARGE CLINICAL RESUME PATIENT DATE OF ADMISSION: DATE OF DISCHARGE: WYLER, WENDY 11/05/18 11/18/18 This is a 36-37-week tem...
1 answer
Comart, a retailer of consumer goods, provides the following information on two of its departments (each...
Comart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center). Investment Center Electronics Sporting goods Sales $ 20,000,000 16,000,000 Net Average Income Invested Assets $1,500,000 $ 7,500,000 1,600,000 10,000,000 Compute...
1 answer
A marketing research company is estimating the average total compensation of CEOs in the service industry....
A marketing research company is estimating the average total compensation of CEOs in the service industry. Data were randomly collected from 18 CEOs and the 97% confidence interval for the mean was calculated to be What additional assumption is necessary for this confidence interval to be valid? The...
1 answer
Need help with B to D, Thank you!! RLC circuit (2) 5 of 10 > Review...
Need help with B to D, Thank you!! RLC circuit (2) 5 of 10 > Review | Constants Learning Goal: To calculate and use complex impedance. A 25.0-9 resistor, 50 mH inductor, and 200 uF capacitor are connected as shown below to an AC voltage source with amplitude 100 V and w=200 5-1. R mat L mm Part A...