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What is the monthly payment to the dealer

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Reference no: EM133098464

Question - You are considering buying a new guitar worth $10,000. The dealer offers you a financing package. You need to make a deposit of 20% today and pay the rest over 4 years with monthly payments at a quoted monthly APR of 5%.

1. What is the monthly payment to the dealer?

2. How much do you owe the dealer immediately after the 30th monthly payment?

3. The dealer offers you a second option: if you pay cash today, you will get a 5% discount. Which option should you choose? Assume that your discount rate is 6% monthly APR.

4. If the dealer were indifferent between the 2 options, what APR would he charge you?

5. Explain why annuity can be viewed as the difference between 2 perpetuities?

Reference no: EM133098464

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