I NEED URGENT HELP
If you have sufficient financial resources to pay cash for a car without borrowing...
You have investments that you could sell and use the proceeds to purchace a vehicle.
You may still chose to borrow at the below marker rate of 4.5% because your investments are generating a high rate of return.
What should be your rule for deciding whether to liquidate investments or to use the dealer's financing to perchage a vehicle?
HOW DO I SOLVE THIS?? Please help asap
By the way...
The interest rate is compounded monthly.
And the load period is 36 months
The price of the vehicle is $44890.00
Use two scenarios; first you borrow the money, second you liquidate investments and pay cash.
Originally Posted by sunshineluvbabi
For the second scenario, assume you reinvest what you would have payed as repayments in scenario 1 (at the best available rate).
After 36 months if you have more money in under scenario 1 then you should take out the loan, otherwise pay cash.
What you are doing is setting up a pair of scenarios with the same cash flows which can then be compared on a like for like basis.
Ok, so in that case, what would you say is the best way to go? How should I answer this question.
I'm pretty sure my answer is completely wrong...
40000 - 1750 = 38250 (rebate amount)
Then I used the 4.5% interest rate
p/y = 12 c/y = 12
CPT PMT= 1137.82
I'm pretty sure that's completely irrelevant, but I am so stuck I couldn't answer this question