In: Finance
Derek decides to buy a new car. The dealership offers him a choice of paying $524.00 per month for 5 years (with the first payment due next month) or paying some amount today. He can borrow money from his bank to buy the car. The bank requires a 5.00% interest rate. What is the most that he would be willing to pay today rather than making the payments?
we need to compute the present value | ||||
We have to use financial calculator to solve this | ||||
put in calculator | ||||
FV | 0 | |||
PMT | -524 | |||
I | 5%/12 | 0.417% | ||
N | 5*12 | 60 | ||
Compute PV | $27,767.13 | |||
Ans = | $27,767.13 |