Question
1.You are about to purchase a new car from a dealer who has a new and unusual payment plan. You have the choice to pay
1.You are about to purchase a new car from a dealer who has a new and unusual payment plan. You have the choice to pay $29,000 cash today or $32,000 in 4 years. If you have the opportunity to borrow the cash price value of the car at a rate of 3.0% and repay the loan in a lump sum in 4 years, which option should you take and why?
2.You own a contract that promises an annuity cash flow of $250 year-end cash flows for each of the next 3 years. (Note:The first cash flow is exactly 1 year from today). At an interest rate of 8%, what is the present value of this contract?
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