Download presentation

Presentation is loading. Please wait.

1
**Management 3 Quantitative Methods**

Quiz #6 Solution courtesy of Meena Tafazzoli

2
The Problem A car dealer offers either 0% financing for 3 years or a $3,000 rebate on a $25,000 car. Assuming that you take the rebate (instead of the 0% financing) and can find a loan for 6% for 36 months, which deal gives you a smaller payment? 2

3
**Pay 0% financing for 36 months**

My financing decision I want to buy a $25,000 car PLAN 1: Pay 0% financing for 36 months PLAN 2: Pay upfront with $3000 rebate, get a loan at 6% monthly payments (36 mos) =$25000/ 36 months = $ monthly payment [1 point] = $25,000 upfront less the $3,000 rebate as a downpayment = $22,000 loan Continued on next slide

4
**Finding the monthly payments on the loan (PLAN 2)**

Recall… PV (loan) = PV (loan payments) 22,000 = Loan payments * PVFA (r/12,t*12) r= 6% annual interest rate compounded monthly! t = 3 years So …… r /12= 0.06/12= 0.005 [1 point] t *12mt= 3*12 = 36

5
**The monthly payments on the loan (PLAN 2)**

22,000 = Loan payments * PVFA Let’s do the PVFA first PVFA(r/12, t*12) = [ (1- (1+r/12)^(-t*12) ] / r = ( ) / (.005) = / 0.005 =

6
**The monthly payments on the loan (PLAN 2)**

22,000 = Loan payment * PVFA $22,000 = Loan payment * $22,000 / = Loan payment Loan payment = $669.28 [2 points]

7
**Monthly loan payments for plan 2**

ON EXCEL Monthly loan payments for plan 2 = PMT (rate, nper, pv) = PMT (.005, 36, 22000) =$669.28

Similar presentations

OK

Time Value of Money. Assume a couple puts $1,000 in the bank today. Their account earns 8% interest compounded annually. Assuming no other deposits were.

Time Value of Money. Assume a couple puts $1,000 in the bank today. Their account earns 8% interest compounded annually. Assuming no other deposits were.

© 2017 SlidePlayer.com Inc.

All rights reserved.

Ads by Google

Ppt on group life insurance Ppt on mind reading machine Ppt on security features of atmosphere Convert pdf to ppt online Ppt on centring or centering Ppt on sources of energy for class 8th physics Ppt on boilers operations management Ppt on management of water resources Ppt on hydrogen fuel rotary engine Ppt on social contract theory summary