Question

In: Finance

An advertisement for Ford trucks offered "2.9% financing (for 48 months) or $2,000 cash back." A...

An advertisement for Ford trucks offered "2.9% financing (for 48 months) or $2,000 cash back." A truck buyer financed $20,000 at the low interest rate instead of paying $18,000 cash (after the $2,000 rebate).

What was the effective rate of interest on the loan if the forgone cash rebate is treated as part of the cost of financing? (The 2.9% interest rate is a monthly compounded nominal rate.)

Solutions

Expert Solution

Effective cost, taking the foregone rebate as cost of borrowing= 8.28011%

Calculation as below:

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Jetta's price Financing offered (annual %) Term (months) Dealership 1 $26,000 4.75% 48 Dealership 2 $20,000...
Jetta's price Financing offered (annual %) Term (months) Dealership 1 $26,000 4.75% 48 Dealership 2 $20,000 3.75% 48 Dealership 3 $19,000 6.50% 48 Create data table that describes how your monthly payment changes with he Jetta's price and annual interest rate. (10 pts) $26,000 $20,000 $19,000 4.75% 3.75% 6.50% (d) Which dealership offers you the lowest monthly payment? (2 pts)
1. From this partial advertisement: Used car $93.38 per month for 60 months Cash price $4,200...
1. From this partial advertisement: Used car $93.38 per month for 60 months Cash price $4,200 Down payment $50 a. Calculate the amount financed. b. Calculate the finance charge. (Do not round intermediate calculations. Round your answer to the nearest cent.) c. Calculate the deferred payment price. (Do not round intermediate calculations. Round your answer to the nearest cent.) d. Calculate the APR by formula. (Do not round intermediate calculations. Round your answer to the nearest tenth percent.) e. Calculate...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT