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What is the effective annual rate for dealer

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Reference no: EM132996770

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Q1. Dealer A offers you a car with monthly payments of $ 330 for 60 months, starting 1 month from today.

Dealer B offers you the same car for 12 quarterly payments of $1,500 each, starting 1 quarter from today.

Assume that the car costs $15,000.

What is the Effective Annual Rate (EAR) for Dealer A?

What is the Effective Annual Rate (EAR) for Dealer B?

Q2. You want to buy a house in your dream city 30 years from today. Assume that the house will cost you $2,000,000 (at t=30 years). You also require annual maintenance of $100,000 for 20 years after that, i.e. from the end of year 31 to the end of year 50.

You plan to make equal monthly deposits for the next 30 years.

Assume that the interest rate is 5.00% per year, compounded monthly?

How much money do you need in 30 years to fulfill your goal?

What monthly deposits do you need to make for the first 30 years, in order to fulfill this goal?

Reference no: EM132996770

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