Derek decides to buy a new car. The dealership offers him a choice of paying $591.00...

Derek decides to buy a new car. The dealership offers him a choice of paying $591.00 per month for 5 years (with the first payment due next month) or paying some $28,252.00 today. He can borrow money from his bank to buy the car. What interest rate makes him indifferent between the two options?

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Expert Solution

using excel rate function

interest rate = RATE(number_of_periods, payment_per_period, present_value, [future_value], [end_or_beginning], [rate_guess]) * number of compounds

= RATE(5*12,591,-28252) * 12

= 9.33%

jeff jeffy answered 2 years ago

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