Question

In: Finance

Ursula wants to buy a $25,000 used car. She has savings of $2,000 plus an $800...

Ursula wants to buy a $25,000 used car. She has savings of $2,000 plus an $800 trade-in. She wants her monthly payments to be about  $395. Which of the following loans offers monthly payments closest to $395?

8.5% APR for 60 months

8.5% APR for 72 months

8.5% APR for 48 months

8.5% APR for 24 months

Solutions

Expert Solution

Price of car = $25,000

Loan Amount = Price of car - savings amount - Trade-in

= $25,000 - $2,000 - $800

= $ 22,200

Now, Calculating the Monthly Payment under each optionss:-

i). 8.5% APR for 60 months

Monthly Payment in this Option is $455.47

ii). 8.5% APR for 72 months

Monthly Payment in this Option is $394.68

iii). 8.5% APR for 48 months

Monthly Payment in this Option is $547.19

iv). 8.5% APR for 24 months

Monthly Payment in this Option is $1009.12

Hence, In Option 2 which is 8.5% APR for 72 months the Loan will offer monthly payment closest to $395

Option 2

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