Annuity (i) You want to purchase a Honda Civic, but you choose to make an initial...

Annuity

(i) You want to purchase a Honda Civic, but you choose to make an initial payment of $2000 and make monthly payments of $400. If the monthly interest rate is 1% and you will make 48 monthly payments for the Civic, what is the present value of your payment scheme?

(ii) If you decide to buy a Chevy Malibu that is more expensive, you are informed that you have to make an initial payment of $2000 and make 60 monthly payments of $400. Assume monthly interest rate is 1%. What is the present value of the payment scheme for buying a Malibu?

Expert Solution

TO CALCULATE PRESENT VALUE OF PAYMENT SCHEME, WE HAVE TO ADD DOWN PAYMENT IN PRESENT VALUE OF ALL MONTHLY PAYMENTS

jeff jeffy answered 9 months ago

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