x.i5rong>4.5 (Problem 4-33) You are shopping for a car and read the fo

QUESTION

x.i5rong>4.5 (Problem 4-33) 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 $10,000.” You have shopped around and know that you can buy a Spitfire for cash for $32,500. What is the
Annual Payment value $10,000 Number ofPayments 4 annual payments Total PaymentAmount ($10,000 * 4) $40,000 Total Cost of the car forcash buying $32,500 Difference Amount

0,000- $32,500) $7,500 Interest rate [$7,500 /$40,000] 0.1875 (or) 18.75% IRR ofthe loan in the advertisement 18.75%

 

ANSWER:

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