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2. [15 points]. You are considering buying a new car worth $35,000 today. The dealership will allow you to pick the car today and pay
2. [15 points]. You are considering buying a new car worth $35,000 today. The dealership will allow you to pick the car today and pay nothing until after you graduate in five years. After five years, you will make a lumpsum payment. You have two financing options. 1. Dealership financing: If you do a dealer financing, you will finance the loan for 5 years at 3% per year compounding monthly. If you choose this option, the dealer will throw in a 6% discount. That is, the dealer will sell the car to you at 94% its current value and hence you will only take a loan of 94% of the value of the car. You will do a onetime lumpsum payment to the dealer after 5 years. 2. Self-financing: Finance it yourself though your own investment strategies. You currently have $23,500 in your investment account and you are currently earning 2.5% interest rate every quarter and you believe this is sustainable at least for the next five years. If you do self-finance, you will pay a lumpsum of $35,000 at the end of year 5 but the catch is, you should have the money to pay it. Which option will you take
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