You are considering buying a car $($sticker price of $$43,000)$ but need financing. The car dealership has offered you two loan options: Loan A requires a $$1,750$ downpayment with the remainder financed over $5$ years with monthly payments based on a contractual rate of interest of $4\mathrm{.}1\%$; Loan B requires no downpayment with the balance financed at zero percent over $4$ years with monthly payments. If you opt for Loan A you are eligible for an immediate $$3,000$ rebate on the car; no rebate is offered on the zero percent financing deal.

The market rate for the risks that you pose is $7\mathrm{.}1\%.$ The car has a market value of $$36,000.$

Assume you have chosen Loan A$.$ How much interest do you pay in the second year of the loan? $[$Don$$t round interim calculations$]$

Multiple Choice

$$7,330\mathrm{.}92$

$$5,460\mathrm{.}18$

$$1,142\mathrm{.}99$

$$2,524\mathrm{.}12$

None of the above