You are planning to buy a luxurious car. The retail price of the car is $65,000. Fox Auto is making you the following offer: You pay $10,000 down and then $2,000 a month for next 30 months. The APR is 12 percent (compounded monthly). This offer is equivalent to a _____ off the retail price (when paid in cash today).
| c= Cash Flow | 2000.000 | |||
| i= Interest Rate | 1.0000% | |||
| n= Number Of Periods | 30 | |||
| Present Value Of An Annuity | ||||
| = C*[1-(1+i)^-n]/i] | ||||
| Where, | ||||
| C= Cash Flow per period | ||||
| i = interest rate per period | ||||
| n=number of period | ||||
| = $2000[ 1-(1+0.01)^-30 /0.01] | ||||
| = $2000[ 1-(1.01)^-30 /0.01] | ||||
| = $2000[ (0.2581) ] /0.01 | ||||
| = $51,615.42 | ||||
| Equivalent price = Doun payment + Present value of EMI | ||||
| =$10000+51615.42 | ||||
| =$61615 | ||||
| Off = $65000-61615 | ||||
| =$3385 | ||||
| Correct Option :A. $3,385 | ||||
| Please upvote. | ||||
You are planning to buy a luxurious car. The retail price of the car is $65,000....
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