Question

1. Allison Jones of Jonesboro, Arkansas, is considering paying $150 a year for an extended warranty on several of her major appliances. If the appliances are expected to last for five years and she can earn 2 percent on her savings, what would be the future value of the amount she will pay for the extended warranty?
2. James Canter of Dallas, Texas, is a good shopper. He always comparison shops and uses coupons every week. James figures he saves at least $40 a month as a result. Assuming an interest rate of 2 percent, what is the future value of this amount over ten years?
3. Amanda Forsythe of Tampa, Florida, must decide whether to buy or lease a car she has selected. She has negotiated a purchase price of $24,700 and could borrow the money to buy from her credit union by putting $3000 down and paying $515 per month for 48 months at 6.5 percent APR. Alternatively, she could lease the car for 48 months at $310 per month by paying a $3000 capital cost reduction and a $350 disposition fee on the car which is projected to have a residual value of $8100 at the end of the lease. Use the Run the Numbers worksheet on page 232 to advise Amanda about whether she should buy or lease the car.
4. Kyle Parker of Fayetteville, Arkansas, has been shopping for a new car for several weeks. So far, he has negotiated a price of $27,000 on a model that carries a choice of a $2500 rebate or dealer financing at 2 percent APR. The dealer loan would require a $1000 down payment and a monthly payment of $564 for 48 months. Kyle has also arranged for a loan from his bank with a 7 percent APR. Use the Run the Numbers worksheet on page 231 to advise Kyle about whether he should use the dealer financing or take the rebate and use the financing from the bank.



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  • CreatedNovember 26, 2014
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