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Question for economics course
, can someone check my work so far and help me please?
as advertised a car company offers a mid level sedan whose price is 143950. their offer is: a downpayment of 93950 and the rest paid over 20 months, interest free(2500 per month), supposing that the banks saving interest rate is 0.03 and loans at 0.06.(per year, calculated monthly)
1) how much is the company's loan worth to someone who has the money
2) how much does someone without the money save, supposing they would have had to have taken a 50000 loan otherwise?
1)
what i did was found the amount that the 20 2500 payments would be worth today,
ieff=(1+0.03/12)^20-1=0.05
P=R*rp(0.05,20)=31155.5
had the man put those 20 payments of 2500 into the bank, at 3% for 20 months, or had he put 31155.5 today, it would be worth the same after 20 months,
basically he is paying the downpayment + 31155.5
2)
ieff=(1+0.06/12)^20-1=0.105
now im ot really sure what to do here, i think i should find out what he will owe the bank to pay back the 50000 loan, but im really not sure and i get strange, huge numbers.
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