TOPIC

Chapter 12 of the text book

Karim Soltan is shopping for a new vehicle and has noticed that many vehicle manufacturers are offering special deals to sell off the current year's vehicles before the new models arrive. Karim's local Ford dealership is advertising 3.9% financing for a full 48 months (i.e., 3.9% compounded monthly) or up to $4000 cash back on selected vehicles.

The vehicle that Karim wants to purchase costs$24 600$24 600including taxes, delivery, licence, and dealer preparation. This vehicle qualifies for$1800cash back if Karim pays cash for the vehicle. Karim has a good credit rating and knows that he could arrange a vehicle loan at his bank for the fullprice of any vehicle he chooses. His other option is to take the dealer financing offered at 3.9% for 48 months.

Karim wants to know which option requires the lower monthly payment. He knows he can use annuity formulas to calculate the monthly payments.