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You are shopping for a car and read the following advertisement in the newspaper: Own a new Spitfire! No money down. Four annual payments of
You are shopping for a car and read the following advertisement in the newspaper: "Own a new Spitfire! No money down. Four annual payments of just 16,000." You have shopped around and know that you can buy a Spitfire for cash for 54,000. What is the interest rate the dealer is advertising (what is the IRR of the loan in the advertisement)? Assume that you must make the annual payments at the end of each year. (Hint: Use a calculator or excel spreadsheet to find the IRR.)
The internal rate of return (IRR) is ____%
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