Questions :

Q1 : (12 points)

Choose a new car to buy. It can be a realistic purchase or your dream car. Figure out the costs of buying this car by filling in the blanks below. You can pay a 10 percent down payment, and your credit history is good enough to get a five-year loan with an interest rate of 5 percent.

A. Make/Model:

B. Manufacturers suggested retail price (MSRP):

C. Cost of options (if applicable):

D. Sales tax of 9 percent (the MSRP, plus any options, multiplied by 0.09):

E. Total cost (the MSRP, options costs, and sales tax added together):

F. 10 percent down payment (total cost multiplied by 0.1):

G. Amount needed to borrow (total cost minus the down payment):

H. Estimated total interest paid (amount borrowed multiplied by 0.05, or 5 percent, per year for five years):

I. Actual cost of the car (total cost plus the total interest paid):

Q2 : (12 points)

Now find a used car to buy, and figure out the costs of buying this car by filling in the blanks below. You don't have enough money for a down payment, and your credit history is so new that you have to get a five-year loan with an interest rate of 10 percent to make the purchase.

A. Make/Model:

B. Asking price:

C. Sales tax of 9 percent:

D. Total cost:

E. Estimated total interest paid (amount borrowed multiplied by 0.1, or 10 percent, per year for five years):

F. Actual cost of the car (total cost plus the total interest paid):

Q3 : (6 points)

If you were going to buy one of these two cars tomorrow, which car would you choose, and why?