1. Elaine wants to buy a new Ford Truck. She sees the following ad: 2019 Ford F-150 Lariat Truck EcoBoost V6 Engine with Auto Start/Stop Technology Engine 3.5L EcoBoost V6 Engine with Auto Start/Stop Technology Electronic 10-speed Transmission with Tow/Haul, Sn Transmission: a. She has negotiated a sales price of $46,585 and she has a $15,000 down payment. She is eligible for the full $10,000 cash rebate. Her bank has pre-approved her for a 72-month car loan at 3.24%. Assuming Elaine wants the cheapest overall price, which option should she take? Should she take the 0% financing offer for 66 months from the dealer, or should she borrow the money from her bank at 3.24% to pay off the dealer and receive the $10,000 cash rebate? Bank Option Dealer Option Selection Explanation: Sales Price Down Payment Cash Rebate PV N PMT Total Payment Total Cost b. Now suppose she is only able to get $1,000 cash back (with the 3.24% financing from her bank). Does this change her decision? Bank Option Dealer Option Selection Explanation: Sales Price Down Payment Cash Rebate PV PMT Total Payment Total Cost Bank Option Dealer Option Selection Explanation: Sales Price Down Payment Cash Rebate PV PMT Total Payment Total Cost Suppose Elaine is able to arrange financing for 8.69% instead of 3.24%. The cash rebate remains at $10,000. Does this change her decision? 2. Vivien wants to buy a house. The house she wants is listed for $300,000, and she wants to avoid PMI insurance. She can get a fixed rate mortgage at 4.25% for 30 years. Don't worry about taxes and insurance for any of these questions, just keep in mind that those would need to be considered as well. a. What down payment will she need? (show your work) b. If Vivian makes her down payment and takes out the loan described, what will be her monthly payment? Price Down Payment PV FV PMT C. If Vivian makes her down payment and takes out the loan described, what will be the total cost of the house? (show your work) d. What would be the total cost of the house if she took out a 15-year mortgage at 3.125%? Price Down Payment PV FV PMT (PMTx12) x 15 years, plus the Down Payment = Total Cost e. What if Vivien can only pay a 10% down payment, what would her first monthly payment be for the 30 year mortgage at 4.25%? (For this example the PMI insurance cost is 1% of the loan amount per year.) Price Down Payment PV PMT PMI PMT + PMI = First Monthly Payment 1. Elaine wants to buy a new Ford Truck. She sees the following ad: 2019 Ford F-150 Lariat Truck EcoBoost V6 Engine with Auto Start/Stop Technology Engine 3.5L EcoBoost V6 Engine with Auto Start/Stop Technology Electronic 10-speed Transmission with Tow/Haul, Sn Transmission: a. She has negotiated a sales price of $46,585 and she has a $15,000 down payment. She is eligible for the full $10,000 cash rebate. Her bank has pre-approved her for a 72-month car loan at 3.24%. Assuming Elaine wants the cheapest overall price, which option should she take? Should she take the 0% financing offer for 66 months from the dealer, or should she borrow the money from her bank at 3.24% to pay off the dealer and receive the $10,000 cash rebate? Bank Option Dealer Option Selection Explanation: Sales Price Down Payment Cash Rebate PV N PMT Total Payment Total Cost b. Now suppose she is only able to get $1,000 cash back (with the 3.24% financing from her bank). Does this change her decision? Bank Option Dealer Option Selection Explanation: Sales Price Down Payment Cash Rebate PV PMT Total Payment Total Cost Bank Option Dealer Option Selection Explanation: Sales Price Down Payment Cash Rebate PV PMT Total Payment Total Cost Suppose Elaine is able to arrange financing for 8.69% instead of 3.24%. The cash rebate remains at $10,000. Does this change her decision? 2. Vivien wants to buy a house. The house she wants is listed for $300,000, and she wants to avoid PMI insurance. She can get a fixed rate mortgage at 4.25% for 30 years. Don't worry about taxes and insurance for any of these questions, just keep in mind that those would need to be considered as well. a. What down payment will she need? (show your work) b. If Vivian makes her down payment and takes out the loan described, what will be her monthly payment? Price Down Payment PV FV PMT C. If Vivian makes her down payment and takes out the loan described, what will be the total cost of the house? (show your work) d. What would be the total cost of the house if she took out a 15-year mortgage at 3.125%? Price Down Payment PV FV PMT (PMTx12) x 15 years, plus the Down Payment = Total Cost e. What if Vivien can only pay a 10% down payment, what would her first monthly payment be for the 30 year mortgage at 4.25%? (For this example the PMI insurance cost is 1% of the loan amount per year.) Price Down Payment PV PMT PMI PMT + PMI = First Monthly Payment