As part of a promotion a car dealer offered a car loan for $25,000 at YTM of 6% with payments made annually over 7 years. (10 marks)

a. What is the annual fixed payment? (up to 3 decimals) (2 marks)

b. If payments are monthly, find the monthly car loan payment? (when calculating the monthly effective interest rate use up to 7 decimals) (3 marks)

c. Suppose that you can take the same loan from a bank at 4% on a yearly basis? How much would you save in present value terms? (3 marks)

d. The car dealer can sell the car on discount. At what price are you better off buying the car at the higher yield from the dealership on a yearly basis? (2 marks)