Homework Answers
The effective price of the car = Present value of the cash flows
PV = 5,500/(1 + 0.10)^1 + 5,500/(1 + 0.10)^2 + 5,500/(1 + 0.10)^3 + 5,500/(1 + 0.10)^4
PV = 5,000 + 4,545.4545454545 + 4,132.2314049587 + 3,756.5740045079
PV = $17,434.2599549
The effective price of the car = $17,434.2599549
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