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You are considering buying a car ( sticker price of $ 4 3 , 0 0 0 ) but need financing. The car dealership has

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 4.1%; 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 7.1%. The car has a market value of $36,000.
How much value do you destroy with Loan B?[Dont round interim calculations]
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 4.1%; 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 7.1%. The car has a market value of $36,000.
Pick the correct statement:
If your only choices are Loan A and Loan B,
Multiple Choice
Loan A is better for you because you are effectively paying $10.17 less for the car
Loan A is better for you because you are effectively paying $1,760.17 less for the car
Loan B is better for you because you are effectively paying $7,905.50 less for the car
Loan B is better for you because you are effectively paying $2,750.00 less for the car
None of the above
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 4.1%; 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 7.1%. 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? [Dont round interim calculations]

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