You are going to buy a new car. The cost of the car is $50,000. You have been offered two payment plans:

• A 10 percent discount on the sales price of the car, followed by 60 monthly payments financed at 9 percent per year.

• No discount on the sales price of the car, followed by 60 monthly payments financed at 2 percent per year. If you believe your annual cost of capital is 9 percent, which payment plan is a better deal?

Assume all payments occur at the end of the month.