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You need a new car, and the dealer has offered you a price of $20,000, with the following payment options: (a) pay cash and receive

You need a new car, and the dealer has offered you a price of $20,000, with the following payment options: (a) pay cash and receive a $2,000 rebate, or (b) pay a $5,000 down payment and finance the rest with a 0% APR loan over 30 months. But having just quit your job and started an MBA program, you are in debt, and you expect to be in debt for at least the next 2 years. You plan to use credit cards to pay your expenses; luckily you have one with a low (fixed) rate of 13.21% APR. Which payment option is best for you?

A.) Your monthly discount rate is?

B.) What is the present value of option (b)?

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