Question
Judy has just received $14,676 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 $14,676 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 $351.She owes 48 more payments. The amount to pay off the loan is $14,640. Judy will save $2,208 in interest if she pays off her car loan now. Judy is also considering investing the $14,676 in a certificate of deposit (CD). She is guaranteed a return of 3% 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.)
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