Time value money question #2

**Q2) You are thinking of buying a used car that costs $6000 and has an expected zero resale value at the end of 4 years. Both Campus Cars and Deals on Wheels are offering special low-rate car loans to York students. Campus Cars will loan you the $6000 and charge you a 10.25% EAR and want the loan repaid in 48 equal monthly payments, with the first payment due immediately. Deals on Wheels will loan you the purchase price of the car at a 9.8% APR with the first of 48 payments starting in one month’s time. Your estimated costs of operating the car, including insurance, are $215.00 per month, payable at the end of each month and increasing each month at an annualized rate of 6% (APR).**

**a) What is the monthly payment for the Campus Cars loan? **

**b) What is the monthly payment for the Wheels on Deals loan? **

**c) What is the present value of your operating costs if your opportunity cost of funds is 9% (APR)? **

**ANSWERS SHOULD BE IN FULL SOLUTIONS FOR BETTER UNDERSTANDING!**

Re: I need help with this time value money questions

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**hassu123** **Q2) You are thinking of buying a used car that costs $6000 and has an expected zero resale value at the end of 4 years. Both Campus Cars and Deals on Wheels are offering special low-rate car loans to York students. Campus Cars will loan you the $6000 and charge you a 10.25% EAR and want the loan repaid in 48 equal monthly payments, with the first payment due immediately. Deals on Wheels will loan you the purchase price of the car at a 9.8% APR with the first of 48 payments starting in one month’s time. Your estimated costs of operating the car, including insurance, are $215.00 per month, payable at the end of each month and increasing each month at an annualized rate of 6% (APR).**

**a) What is the monthly payment for the Campus Cars loan? **

**b) What is the monthly payment for the Wheels on Deals loan? **

**c) What is the present value of your operating costs if your opportunity cost of funds is 9% (APR)? **

**ANSWERS SHOULD BE IN FULL SOLUTIONS FOR BETTER UNDERSTANDING!**

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