bank2008 introduction ti financial planning

Question B-1

Jamal is seeking to purchase a motor vehicle for $18,000 and requires finance for this amount in order to complete the purchase:

Option A: 3-year loan with end of month repayments of $350.

Option B: 2-year loan with end of month repayments of $500.

Option C: 3-year loan with end of quarter repayments of $1,050.

a) On what financial basis should Jamal seek to differentiate and select between the different finance options? (5 marks)

b) Advise Jamal as to the preferred finance alternative. Hint: you will need to calculate the financing option with the lowest comparable cost (15 marks)