BUYING A LUXURY CAR
Cost of car
Cash discount
Cash cost after discount
credit cost
Bank loan, monthly
EAIR, bank
IRR, monthly of cash minus zero %
EAIR, dealer
	Zero % loan	Cash
PV of alternative
Period	Zero % loan	Cash			Cash minus "zero %" loan
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(EAIR in loans) You're considering buying a new top-of-the-line luxury car. The car's list price is $99,000. The dealer has offered you two alternatives for purchasing the car: - You can buy the car for $90,000 in cash and get a $9,000 discount in the bargain. - You can buy the car for the list of $99,000. In this case, the dealer is willing to take $39,000 as an initial payment. The remainder of $60,000 is a "zero-interest loan" to be paid back in equal installments over 36 months. Alternatively, your local bank is willing to give you a car loan at an annual interest rate of 10%, compounded monthly (that is, 10%/12 per month). Decide how to finance the car: Bank loan or zero-interest loan with the dealer, or cash payment