The price of a new Model 3 is $40000. Tesla is planning to offer Model 3 buyers

Question

The price of a new Model 3 is $40000. Tesla is planning to offer Model 3 buyers a five year loan at 2.3% compounded monthly.

a) What would be the value of the 60 monthly payments for a consumer who buys a Model 3 using the financing option?

b) Telsa is also considering giving a cash rebate of $4000 for anyone who purchases the car in cash (without using the financing option). What is the actual interest rate, compounded monthly, that Telsa actually charges if we consider that the price of a new Model 3 is actually only $36000 not $40000 (If we take into consideration the cash rebate of $4000, anyone who buys the car without the financing option would only pay $36000, not $40000?)

Explanation / Answer

a)use pmt formual in excel to find this
=pmt(rate,nper,pv,fv,type)
=pmt(2.3%/12,60,-40000,0,0)
=706.37
b)use rate formuale in excel to find this
=rate(nper,pmt,pv,fv,type)
=0.18%
yearly =0.18%*12=2.11%

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