Assume the car can be purchased for 0% down for 60 months (in lieu of rebate). A

Question

Assume the car can be purchased for 0% down for 60 months (in lieu of rebate).

A BMW that has a sticker price of $62,540 with factory and dealer rebates of $6,000

(a) Find the monthly payment if financed for 60 months at 0% APR. (Round your answer to the nearest cent.)

the answer :$ 1,042.33

(b) Find the monthly payment if financed at 2.5% add-on interest for 60 months. (Round your answer to the nearest cent.)

the answer : $1,060.13

(c) Use the APR approximation formula to find the APR for part (b). (Round your answer to one decimal place.)

4.9 %

(d) State whether the 0% APR or the 2.5% add-on rate should be preferred.

0% APR

please explain to me, I don't get it.

Assume the car can be purchased for 096 down for 60 months (in lieu of rebate). A BMW that has a sticker price of $62,540 with factory and dealer rebates of $6,000 (a) Find the monthly payment if financed for 60 months at 0% APR. (Round your answer to the nearest cent.) $1042.33 1,042.33 (b) Find the monthly payment if financed at 2.5% add-on interest for 60 months. (Round your answer to the nearest cent.) ill:1.. : X 1,060.13 (c) Use the APR approximation formula to find the APR for part (b). (Round your answer to one decimal place.) (No Response) X 4.9 % (d) State whether the 0% APR or the 2.5% add-on rate should be preferred. 0% APR 2.5% add-on rate

Explanation / Answer

a) The monthly payment if financed for 60 months at 0% APR is = $(62540/60) = $1042.33

b) The monthly payment if financed at 2.5% add-on interest for 60 months is =

$[{(62540-6000)*(1+(2.5*60/(12*100)))}/60] = $1060.13

c) The required APR = [(1060.13/(62540-6000))*(12/60)*100*12]% = 4.5%

d) 0% APR is better than 2.5% add-on interest ,i.e., 4.5% APR.

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