Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

i can do question 1, but not sure how to do 2 & 3, thx! ACTSC 221 Written Assignment #1 Case Study 1 Emily wants

image text in transcribed

i can do question 1, but not sure how to do 2 & 3, thx!

image text in transcribed ACTSC 221 Written Assignment #1 Case Study 1 Emily wants to buy a new car for $25,300, including all fees and taxes. \"Now's a good time to buy,\" claims the salesman, \"we're offering 4 year loans at 5.9%. Even if you have the cash, you're better off borrowing.\" Emily is confused. The salesman goes on to explain the payment on the car loan would be $593.01, which means that total interest paid on the loan will be $3,164.48. By investing the $25,300 at current savings account rates of 3.5% (compounded monthly), Emily could generate interest of $3,796.00 which means she'd be $631.52 better off by investing her money in a savings account. (a) Verify the numbers in the second paragraph. (b) Is Emily really better off by borrowing the money for her new car? Case Study 2 John and Jane Smith have just received a quote for home, car, and liability insurance. The annual premium amounts to $3,500. They are given the choice of paying i) the entire amount in advance, ii) $310 per month with the first and last month due in advance; or iii) $920 per quarter, payable on the first of every quarter. (a) Calculate the rates being charged for Options (ii) and (iii). (b) If the Smiths do not have any cash, but can borrow at 10% compounded monthly, what should they do? Case Study 3 A recent newspaper advertisement offered car buyers the opportunity to lease a new vehicle for $5,000 down plus $350 per month for 48 months. At the end of the 48 months, the car will be returned to the dealer. Alternatively, the same car could be purchased outright for $34,000. It is estimated that in 48 months, the car could be sold for $20,000. At what interest rate (compounded monthly) are these two options equivalent? 1

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Multinational Business Finance

Authors: David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett

15th edition

134796551, 134796550, 978-0134796550

Students also viewed these Finance questions