Question

Suppose a car dealership offers a low-interest rate and a longer payoff period to customers or a high-interest rate and a shorter payoff period to customers. During the first month these options were available to customers, more customers choose the low-interest rate and longer payoff period.

A. Does this mean does mean most customers want a lower interest rate? Explain why this may or may not be a valid assumption.

B. Calculate the estimated interest and total costs for customers purchasing a new Porsche 911 2019 car for a short term and longer term loan. The average cost of the new Porsche 911 cars is $113,300.

Term Interest Rate  

36 5.08%

48 5.10%

60 5.15%

C. Would you select the lower rate, short term loan or the higher rate, longer term loan. Explain why you selected the particular rate and term loan.

Answer 1