Does this change her initial decision

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Reference no: EM131867755

PART B. She sees an advertisment for a 2016 Ford Fiesta. 0% APR for 66 months or 2000 cash back. She has negotiated a sales price of $14,580 and she has a $1,000 down payment. She is eligible for the full $2,000 cash rebate. Her bank has pre-approved her for a 60-month car loan at 3.20%.

a) Assuming Alejandra wants the cheapest overall price, which option should she take? Should she take the 0% financing offer for 66 months from the dealer, or should she borrow the money from her bank at 3.20% to pay the dealer and receive the $2,000 cash rebate?

b) Why should Alejandra make this decision based on overall price, not monthly payment?

Now suppose she is only able to get $950 cash back (with the 3.20% financing from her bank). Does this change her decision?

Suppose Alejandra can only arrange financing at 7.50% instead of 3.20%. The cash rebate remains at $2,000. Does this change her initial decision? What if Vivian can only pay a 15% down payment, what would her first monthly payment be for the 30-year mortgage at 3.75%? (Assume PMI insurance cost is 1% of the loan amount per year.)

Reference no: EM131867755

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