?(Nonannual compounding using a calculator?) ?Ford\'s current incentives for cus

Question

?(Nonannual compounding using a calculator?) ?Ford's current incentives for customers looking to buy a Mustang include either financing at an APR of 4.9 percent compounded monthly for 60 months or $1,000 cash back.? Let's assume Suzie Student wants to buy the premium Mustang? convertible, which costs $25,000?, and she has no down payment other than the cash back from Ford. If she chooses the ?$1,000 cash? back, Suzie can borrow from the VTech Credit Union at an APR of 6.9percent compounded monthly for 60 months. What will Suzie? Student's monthly payment be under each? option? Which option should she? choose?

Explanation / Answer

Without cash back:

N = 60, FV = 0, PV = 25,000, rate = 4.9%/12

use PMT funciton in Excel

Payments = 470.64

with cash back:

N = 60, FV = 0, PV = 24,000, rate = 6.9%/12

use PMT funciton in Excel

monthly payments = 474.10

so it is better to opt the option without any cash back

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