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You can buy a car that is advertised for $25,440 on the following terms: (a) pay $25,440 and receive a $5,440 rebate from the manufacturer; (b) pay $530 a month for 4 years for total payments of $25,440, implying zero percent financing.
a. Calculate the present value of the payments for option (a), if the interest rate is 1.00% per month.
Present value $
b. Calculate the present value of the payments for option (b), if the interest rate is 1.00% per month. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
c. Which is the better deal?
Option b
Option a
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