Derek decides to buy a new car. The dealership offers him achoice of paying $518.00...

Derek decides to buy a new car. The dealership offers him a choice of paying $518.00 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 6.00% interest rate. What is the most that he would be willing to pay today rather than making the payments? Round to: 2 decimal places.

Expert Solution

Ans:- In this question, we need to find the Present Value of annuity. we will use the PV function of excel to find the Present Value.

Rate=6%/12,Nper=5*12=60,Pmt=-$518,FV=0

Therefore, the most he must be willing to pay today will be $26,793.84.

jeff jeffy answered 2 years ago

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