What is the opportunity cost of cash option over first year

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Reference no: EM13923601

The new car costs $19,999. Two options; 1) down payment of 20% and finance the balance with no interest and payments for the first few months, 2) or get a rebate of $1,000 if pays cash. The financing alternative would require to pay $460 a month for two years starting at the beginning of the 12th month. My savings account, which pays 4.5% interest per annum compounded monthly, shows a balance large enough to pay cash for the car. a) What is the opportunity cost of the cash option over the first year? b) What is the cost of the financing alternative? c) What is the cost of the cash option?

Reference no: EM13923601

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