Question

You are planning to buy a car worth $20,000. Which of the two deals described below would you choose, both with a 48-month term? (NB: estimate the monthly payment of each offer). i) the dealer offers to take 10% off the price, then lend you the balance at an annual percentage rate (APR) of 9%, monthly compounding. ii) the dealer offers to lend you $20,000 (i.e., no discount) at an APR of 3%, monthly compounding.

89

likes445 views

Sigrid

4.5

101 Answers

10% off deal
Monthly payment: A=\frac{18000(1+\frac{0.09}{12})^{48}(\frac{0.09}{12})}{(1+\frac{0.09}{12})^{48}-1}=447.93
Total payment: 447.93\times48=21500.64
No discount
Monthly payment: A=\frac{20000(1+\frac{0.03}{12})^{48}(\frac{0.03}{12})}{(1+\frac{0.03}{12})^{48}-1}=442.69
Total payment: 442.69\times48=21249.12
No discount is better deal

Frequently asked questions (FAQs)

What is the maximum value of the cosine function f(x) = cos(x), when x is measured in radians?

+

What is the limit of (2x^3 - 4x^2 + 5x + 1) as x approaches 3?

+

What is the value of x in the equation log(x) + log(5) = log(20)?

+

New questions in Mathematics