Question 4 (11 marks) a Vivian plans to replace all four air-conditioners in her home. The total cost is $70,000. The loan instalment plan offered by the shop requires her to pay $10,000 cash as down payment and borrow the remaining balance. The loan will be repaid in 2 years, at a monthly flat rate of 0.8%. Vivian is required to pay $250 as administration fee for loan application. The administration fee is paid at the time of application with no refund. Required: i. Calculate the total interest cost and fee on Vivian's instalment plan. (2 marks) ii. Calculate the monthly repayment amount of the instalment plan. (2 marks) Calculate the approximate annual percentage rate (APR). (2 marks) iii. b. Nancy wants to purchase a new car. To avoid spending huge amount of money on the car, she is considering the options of financing the car purchase and leasing the car. The related costs of the two options are shown below: Option 1: Buying Option 2: Leasing Down payment to finance vehicle $45,000 Security Deposit for lease $14,000 Monthly loan payment $6,800 Monthly lease payment $6,200 Length of loan - 60 months Length of lease - 60 months Value of vehicle at end of loan $62,000 End-of-lease charges $6,000 Opportunity cost interest rate: 2.5% Opportunity cost interest rate: 2.5% Based on the above data, which option should Nancy choose? Support your answer with total cost to buy and total cost to lease. (5 marks) Question 4 (11 marks) a Vivian plans to replace all four air-conditioners in her home. The total cost is $70,000. The loan instalment plan offered by the shop requires her to pay $10,000 cash as down payment and borrow the remaining balance. The loan will be repaid in 2 years, at a monthly flat rate of 0.8%. Vivian is required to pay $250 as administration fee for loan application. The administration fee is paid at the time of application with no refund. Required: i. Calculate the total interest cost and fee on Vivian's instalment plan. (2 marks) ii. Calculate the monthly repayment amount of the instalment plan. (2 marks) Calculate the approximate annual percentage rate (APR). (2 marks) iii. b. Nancy wants to purchase a new car. To avoid spending huge amount of money on the car, she is considering the options of financing the car purchase and leasing the car. The related costs of the two options are shown below: Option 1: Buying Option 2: Leasing Down payment to finance vehicle $45,000 Security Deposit for lease $14,000 Monthly loan payment $6,800 Monthly lease payment $6,200 Length of loan - 60 months Length of lease - 60 months Value of vehicle at end of loan $62,000 End-of-lease charges $6,000 Opportunity cost interest rate: 2.5% Opportunity cost interest rate: 2.5% Based on the above data, which option should Nancy choose? Support your answer with total cost to buy and total cost to lease
