Question

7. + 1/2 points Previous Answers CraudColAlg6 1.1.EX.018.MI. 6/100 Submissions Used My Notes Ask Your Teacher You are buying a new car, and you plan to finance your purchase with a loan you will repay over 48 months. The car dealer offers two options: either dealer financing with a low APR, or a $2000 rebate on the purchase price. If you use dealer financing, you will borrow $14,000 at an APR of 3.3%. If you take the rebate, you will reduce the amount you borrow to $12,000, but you will have to go to the local bank for a loan at an APR of 8.87%. To answer the first question below, you may need the following formula, where Mis your monthly payment, in dollars, if you borrow P dollars with a term of 48 months at a monthly interest rate of r(as a decimal), and r = APR/12. Pr1 + r) 48 (1 + 7)48-1 Should you take the dealer financing or the rebate? dealer financing rebate How much will you save over the life of the loan by taking the option you chose? (Round your answer to the nearest cent.) Need Help? Read It Master It Talk to a Tutor Show My Work (Optional)

Answer 1

M (Pr(1+r) ^48) /((1+r) ^48 - 1) Formula: Option 1 Dealer Financing $14000 @ APR of 3.3% r-APR/12 0.033/12 0.00275 M (14000 0.00275*(1+0.00275) ^48)/((1+0.00275) ^48) - 1) 311.74 Option 2 Rebate $12000 @ APR of 8.87% rFAPR/12 0.0887/12 0.00739167 M (12000*0.00739167*(1+0.00739167)^48)/((1+0.00739167) ^48) - 1) 297.88 Should you take dealer financing or rebate? Rebate would be better How much will you save over the life of the loan by taking the option you choose Option 1 Option 2 311.74 297.88 Diff. saved ($) 13.86 Multiplied by number of instalments 48 Savings over life of the Loan ($) 665.28