Decision making in finance using credit

Student: Class: Date: Decision Making in Finance: Using Credit VI.D Student Activity Sheet 10: Buying a Losing Investment 1. Christina is considering buying a new car with a sticker price of $23,599. Her credit union offers her a three-year car loan at 5.99% annual percentage rate (APR) with 10% as a down payment. Find the monthly payment. Variable Definition of Variable N number of compounding periods I% annual interest rate PV principal, or present value PMT Value in Christina’s Loan Situation amount of each regular payment FV future value P/Y number of payments per year C/Y number of compounding periods per year 2. Christina’s car will be worth $14,250 in three years. What will the total cost of the car be at the end of the loan? What is the benefit of this type of financing? What is the cost of this type of financing? 3. Christina considers a different option. The dealership offers 0% down and 0% APR for two years. The car will be worth $17,629 in two years. What will the monthly payments be under these conditions? How much will the total cost of the car be if Christina takes this loan? Which loan should Christina take? Why? 4. Christina has an offer to lease the same car for three years at $349 per month. The lease has a balloon payment of $1,200 at the end of three years. What is the total cost of the lease? Charles A. Dana Center at The University of Texas at Austin Advanced Mathematical Decision Making (2010) Activity Sheet 10, 4 pages 29 Student: Class: Date: Decision Making in Finance: Using Credit VI.D Student Activity Sheet 10: Buying a Losing Investment 5. What interest rate is Christina being charged for leasing the car? Variable Definition of Variable N number of compounding periods I% annual interest rate PV principal, or present value PMT Value in Christina’s Leasing Situation amount of each regular payment FV future value P/Y number of payments per year C/Y number of compounding periods per year Should Christina take the lease? Why or why not? 6. The car manufacturer offers a lease-to-purchase option at 1.9% APR for three years. At the end of this option, Christina can keep the vehicle by paying the depreciated value or walk away for a fee of $150. What is the monthly payment of the lease-to-purchase option? What is the total cost of the purchase option if she walks away? Variable Definition of Variable N number of compounding periods I% annual interest rate PV principal, or present value PMT Value in Christina’s Lease-to-Purchase Situation amount of each regular payment FV future value P/Y number of payments per year C/Y number of compounding periods per year Charles A. Dana Center at The University of Texas at Austin Advanced Mathematical Decision Making (2010) Activity Sheet 10, 4 pages 30 Student: Class: Date: Decision Making in Finance: Using Credit VI.D Student Activity Sheet 10: Buying a Losing Investment 1. Christina is considering buying a new car with a sticker price of $23,599. Her credit union offers her a three-year car loan at 5.99% annual percentage rate (APR) with 10% as a down payment. Find the monthly payment.