Question

Y*ou buy a car, which cost $320.000. The purchase can be
financed with a payment of 20% and the remaining 80% is covered by
an 8-year annuity loan. The loan bears interest rate of 3% p.a.,
and it has monthly terms in the following you therefore also apply
a discount rate of 3% p.a.*

**a) Determine the size of the payment, U, and the monthly
payment, Y, belonging to the loan.**

*You consider if it is realistic to sell the car after 3
years.*

**b) Calculate the present value of the paying monthly
benefit, Y, for 3 years from now. What is the value of this
including the payout U?**

*You could even rent the car for 3 years which requires a
one-time payment of $10000 today and after a monthly payment of
$3750*

**c) What is the present value of the renting
deal?**

*If you buy the car today, you expect to sell it for $200000
after 3 years to pay back the annuity loan*

**d) How much do you have left after 3 years, when you
payed back the loan?** **What is the present value of
this? What will the present value today of buying the car under
these conditions?**

*It turns out the leasing agreement includes a service
agreement costs of $500 each month*

**e) What will the present value of today buying the car
now that you include the cost of the service
agreement?**

*Of course, it is highly uncertain what price you can sell
the car for in three years*

**f) Set up an equation that shows what the car with a
documented service agreement must be able to sell to after three
years, so that the present value of resp. purchase and lease are
the same. Determine (numerically) this selling price.**

- Thank you so much in advance :)

Answer #1

Cost of Car = $320,000

a) Size of Down Payment (U) = $320,000 x 20% = $64,000

Amount of Loan = $320,000 x 80% = $256,000

Rate of Interest = 3% p.a. that is 0.25% per month n = 8 years = 96 months

Thus, 256000 = Y x PVIFA(0.25%, 96)

256000 = Y x 85.2546

Y = 256000 / 85.2546 = 3002.77 = 3003

Thus, monthly payment Y = $3,003

b) Y = 3003 n = 3 years = 36 months

Present Value = 3003 x PVIFA (0.25%, 36)

= 3003 x 34.3865 = 103262.66 = $103,263

Present Value of Y including U = $103,263 + $64,000 = $167,263

c) One Time Payment = $10,000 Monthly Rent Payment =$3,750

Present Value of Rental deal = 3750 x PVIFA (0.25%, 36) + 10,000

= (3750 x 34.3865) + 10,000 = 128,949 + 10000 = $138,949

Please post the remaining questions separately. As per policy we can answer only 2 to 3 parts. Sorry for the inconveience .

After deciding to buy a new car, you can either lease the car or
purchase it with a three-year loan. The car costs $30,000. The
dealer has a lease program where you pay $100 today and $400 per
month for the next three years. If you purchase the car, you will
pay it off in monthly payments over the next three years at a 8
percent APR. You believe that you will be able to sell the car for
$20000...

After deciding to buy a new car, you can either lease the car or
purchase it on a three-year loan. The car you wish to buy costs
$32,500. The dealer has a special leasing arrangement where you pay
$94 today and $494 per month for the next three years. If you
purchase the car, you will pay it off in monthly payments over the
next three years at an APR of 6 percent. You believe you will be
able to...

After deciding to buy a new car, you can either lease the car or
purchase it on a two-year loan. The car you wish to buy costs
$32,000. The dealer has a special leasing arrangement where you pay
$93 today and $493 per month for the next two years. If you
purchase the car, you will pay it off in monthly payments over the
next two years at an APR of 7 percent. You believe you will be able
to...

You need a new car. You can either lease or buy the car for 355
000 SEK. In both cases you expect to use the car for 5 years. It
will have a residual value of 120 000 SEK after 5 years. You can
borrow at a rate of 2.5% APR with monthly compounding.
(a) In case you buy the car you will take an annuity loan over 5
year at a borrowing rate of ${col}%. What will be your...

Annuity Payment and EAR
You want to buy a car, and a local bank will lend you $30,000.
The loan would be fully amortized over 3 years (36 months), and the
nominal interest rate would be 6% with interest paid monthly. What
is the monthly loan payment? Do not round intermediate
calculations. Round your answer to the nearest cent.
$
What is the loan's EFF%? Round your answer to two decimal
places.
%

Christie is buying a new car today and is paying a $7500 cash
down payment. She will finance the balance at 7.25 percent
interest. Her loan requires 36 equal monthly payments of $450 each
with the first payment due 30 days from today. Which one of the
following statements is correct concerning this purchase?
A. The future value of the loan is equal to 37 x 450.
B. The present value of the car is equal to $7500 + (36...

After deciding to get a new car, you can either lease the car or
purchase it with a four-year loan. The car you wish to buy costs
$37,000. The dealer has a special leasing arrangement where you pay
$103 today and $503 per month for the next four years. If you
purchase the car, you will pay it off in monthly payments over the
next four years at an APR of 7 percent, compounded monthly. You
believe that you will...

After deciding to acquire a new car, you can either lease the
car or purchase it with a two-year loan. The car you want costs
$32,000. The dealer has a leasing arrangement where you pay $93
today and $493 per month for the next two years. If you purchase
the car, you will pay it off in monthly payments over the next two
years at an APR of 7 percent. You believe that you will be able to
sell the...

3c2.
A commercial bank will loan you $52,207 for 7 years to buy a
car. The loan must be repaid in equal monthly payments at the end
of the month. The annual interest rate on the loan is 18.98 percent
of the unpaid balance. What is the amount of the monthly
payments?
Round the answer to two decimal places.
3b2.
What is the present value of the following annuity?
$3,185 every half year at the beginning of the period for...

After deciding to get a new car, you can either lease the car or
purchase it with a four-year loan. The car you wish to buy costs
$35,500. The dealer has a special leasing arrangement where you pay
$100 today and $500 per month for the next four years. If you
purchase the car, you will pay it off in monthly payments over the
next four years at an APR of 7 percent, compounded monthly. You
believe that you will...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 5 minutes ago

asked 7 minutes ago

asked 9 minutes ago

asked 12 minutes ago

asked 12 minutes ago

asked 13 minutes ago

asked 13 minutes ago

asked 14 minutes ago

asked 14 minutes ago

asked 14 minutes ago

asked 17 minutes ago

asked 19 minutes ago