2) Pete has negotiated a price for a new car at $25,000 on a model that carries a choice of a $2000 rebate or financing at 2% APR from the dealer. The dealer loan would require a $1000 down payment and a monthly payment of $525 a month for 48 months. Pete had arranged for a loan from his bank at 5% APR. Use the run the numbers worksheet on page 240 to advise Pete about whether he should take the rebate, use the dealer financing, or use the financing from his bank. This problem you should take into consideration the $2000 rebate, the dealer financing, and the bank financing.

Your Figures Step Example 1. Determine the dollar amount of the rebate. $3,000 2. Add the rebate amount to the finance charge for the dealer financing (dollar +$1,269 cost of credit) 3. Use the formula from Chapter 7 (Equation (7.2) on page 221 and used here as Equation (8.1) to calculate an adjusted APR for the dealer financing. Y(95P+9)F APR = (8.1) 12PP + 1)(40+) Where APR = Annual percentage rate Y = Number of payment periods in one year F= Finance charge in dollars D-Debt (amount borrowed) P= total number of scheduled payments (12)(95 x 36) + 9X 3,000 + 51,269) APR = 9.45 12 X 36(36 + 1)(4 X $28,000) ($3,000+ $1.269) 4. Write in the APR that you arranged on your own 7% O BI als hp