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Ford Motor​ Company's current incentives include 4.8 percent APR financing for 84 months or $ 900...

Ford Motor​ Company's current incentives include 4.8 percent APR financing for 84 months or $ 900 cash back on a Mustang. ​ Let's assume Suzie Student wants to buy the premium Mustang​ convertible, which costs $ 30 comma 000​, and she has no down payment other than the cash back from Ford. If she chooses the ​$900 cash​ back, Suzie can borrow from the VTech Credit Union at 6.8 percent APR for 84 months​ (Suzie's credit​ isn't as good as Prof.​ Finance). What will Suzie​ Student's monthly payment be under each​ option? Which option should she​ choose? a.  If Suzie chooses 4.8 percent APR financing for 84 months to buy the premium Mustang​ convertible, which costs $ 30 comma 000 equals PMT left parenthesis 71.224446 right parenthesis​, what will her monthly payment​ be? ​$ nothing ​ (Round to the nearest​ cent.)

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Answer #1

a]

If Suzie chooses 4.8 percent APR financing for 84 months, monthly payment is calculated using PMT function in Excel :

rate = 4.8% / 12

nper = 84

pv = 30,000 (no cash back as the financing option with Ford is chosen)

PMT is calculated to be $421.20

b]

If Suzie chooses 6.8 percent APR financing for 84 months, monthly payment is calculated using PMT function in Excel :

rate = 6.8% / 12

nper = 84

pv = 29,100 (amount of loan = price - cash back = $30,000 - $900)

PMT is calculated to be $436.36

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