Chapter 8 Solutions

Chapter 8 Solutions - formula to calculate an adjusted APR...

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Chapter 8 Solutions 1) If Diana decides to purchase this car, she will be borrowing $21,700 ($24,700 – $3,000) and her finance charges will be $3,020 [($515 x 48) – $21,700]. If she leases the car, the capitalized cost after taking the capitalized cost reduction will be $21,700 ($24,700 – $3,000). The dollar cost of leasing compared with the finance charges of borrowing will be - $770 [($260 x 48) + $350 + $8,100 – $21,700]. Therefore, lease the car since - $770 < $3,020 2) It appears that Tom should take the dealer financing. Using the n-ratio APR
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Unformatted text preview: formula to calculate an adjusted APR for the dealer financing, it is only 2.791 percent, compared to the 7 percent loan through Toms bank. Toms bank loan will be $24,500, and his finance cost will be $1,516 [($542 x 48) $24,500). APR = [Y(95P+9)F] / 12P(P+1)(4D+F) APR = (12)[(95 x 48) + 9](1,516) / (12 x 48)(48 + 1)[(4 x 26,000) + (1,516)] = 83,119,248 / 2,978,083,584 = 0.02791 = 2.791%...
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This note was uploaded on 08/27/2008 for the course FIN 200 taught by Professor Delcorral during the Spring '08 term at Loyola New Orleans.

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