Sally’s going to buy a used car for $5,000. She has enough money saved so that s
ID: 2721945 • Letter: S
Question
Sally’s going to buy a used car for $5,000. She has enough money saved so that she could use cash to pay for it, or she could borrow and make payments over the next three years. Answer the following questions. a. How much would her $5,000 earn over the next three years if she invested it at 4% simple interest? Please show calculations. b.How much in total would she pay for the car if she made payments that included interest of 5% simple interest? Please show calculations. c. Given the calculations above, would you recommend that Sally finance her car or pay for it and invest the 5,000 for the next year? Why?Explanation / Answer
A.
Interest=(Principle x Rate x Time)/100=(5000 x 4 x 3)/100=60000/100=600
She will Earn=$5000+$600=$5600
B.
Interest=(Principle x Rate x Time)/100=(5000 x 5 x 3)/100=75000/100=750
Total payment=$5750
Sally should not finance her car as it is an expensive deal rather pay in form of cash and invest 5000 for the next year
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