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CASE 2 . Good-Deal Auto developed a new sales gimmick to help sell its inventory of new automobiles. Because many new car buyers need financing,

CASE 2. Good-Deal Auto developed a new sales gimmick to help sell its inventory of new automobiles. Because many new car buyers need financing, Good-Deal offered a low down payment and low car payments for the first year after purchase. It believes that this promotion will bring in some new buyers. On January 1, 2019, a customer purchased a new 33,000 automobile, making adown payment of1,000. The customer signed a note indicating that the annualrate of interest would be 8% and that quarterly payments would be made over 3 years. For the first year, Good-Deal required a 400 quarterlypayment to be made on April 1, July 1, October 1, and January 1, 2020. After this one-year period, the customer was required to make regular quarterly payments that would pay off the loan as of January 1, 2022.

Instructions

  1. Prepare a note amortization schedule for the first year (5%)
  2. Indicate the amount the customer owes on the contract at the end of the first year (5%)
  3. Compute the amount of the new quarterly payments (5%)
  4. Prepare a note amortization schedule for these new payments for the next 2 years (5%)
  5. What do you think of the new sales promotion used by Good-Deal (5%)

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