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P4-48 Monthly loan payments Tim Smith is shopping for a used car

P4-48 Monthly loan payments Tim Smith is shopping for a used car
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FINANCE

FINANCE 419 (FIN 419)

FIN 419
Principles of Managerial Finance
Lawrence J. Gitman

P4–48 Monthly loan payments Tim Smith is shopping for a used car. He has found one priced at $4,500. The dealer has told Tim that if he can come up with a down payment of $500, the dealer will finance the balance of the price at a 12% annual rate over 2 years (24 months).
a. Assuming that Tim accepts the dealer’s offer, what will his monthly (end-of-month) payment amount be?
b. Use a financial calculator or Equation 4.15a (found in footnote 9) to help you figure out what Tim’s monthly payment would be if the dealer were willing to finance the balance of the car price at a 9% annual rate.

 

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