Question
Judy has just received $10,949 as an inheritance from her uncle and is considering ways to use the money. Judy's car is one year old,
Judy has just received $10,949 as an inheritance from her uncle and is considering ways to use the money. Judy's car is one year old, and her monthly payment is $271. She owes 48 more payments. The amount to pay off the loan is $10,870. Judy will save $2,138 in interest if she pays off her car loan now. Judy is also considering investing the $10,949 in a certificate of deposit (CD). She is guaranteed a return of 4% on a four-year CD. How much would Judy earn from the CD? Which of the two alternatives offers the better return? (Note: Ignore any tax effect.) (Hint:you need to compute the interest rate on Judy's loan.)
The amount of interest Judy would earn from the CD is?
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