Derek decides to buy a new car. The dealership offers him achoice of paying $524.00...

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?

Expert Solution

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

jeff jeffy answered 3 years ago

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