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4)A car dealer offers you two payment plans. Under the first plan, you make 10% downpayment for the car and pay the remaining 90% of
4)A car dealer offers you two payment plans. Under the first plan, you make 10% downpayment for the car and pay the remaining 90% of the purchase price at the end of the next 9 months with equal installment. Under the second plan, if you pay the entire bill immediately, you can take 30% discount from the purchase price. Which is a better deal if you can lend and borrow funds at a 12% APR where interest is monthly compounded? Reconsider the question in item i). Now, the dealer offers you a third plan where you make 20% downpayment for the car and pay the remaining 80% of the purchase price at the end of the next 4 quarters with equal installment. Would you prefer the third plan or stick to your original answer? Interest rate in the market is still 12% APR with monthly compounding structure
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