Question

You want to purchase an automobile for $ 31 comma 112 $31,112. The dealer offers you​ 0% financing for 48 months or a $3,825 rebate. You can obtain 6% financing for

48 months at the local bank. Which option should you​ choose?

Answer 1

Step 1:
	Number of years =48/12 =4
	Present value of automobile
	PV= FV/(1+r)^n
	Where,
	FV= Future Value
	PV = Present Value
	r = Interest rate
	n= periods in number
	= $31112/( 1+0.06)^4
	=31112/1.26248
	= $24643.62
Step 2:	Price without financng =$31112-3825
	=$27287
Step 3:	Decision:
	Financiang option is better because it is less costly
	as compare to today price. (price - rebate)