Extra Credit Activity #1

You are considering buying a new car worth $15,000. You can finance the car either by withdrawing cash from your savings account (option 1), which earns 8% interest compounded monthly or by borrowing $15,000 from your dealer for five years at 11% interest compounded monthly and quarterly payments (option 2).

1. Show the loan amortization schedule for option 2 (50 points)
2. How much interest will you pay over the lifetime of the loan? (15 points)
3. How much interest will you earn from your savings account in five years? (15 points)
4. Which is the best option to buy your new car? Hint: Use future value to compare them. (20 points)

Submit an excel file with your answers. Mac users need to save the spreadsheet as xls or xlsx.