# Question: 1 Using a new car price of 20 000 and assuming the

1. Using a new-car price of $20,000 and assuming the market value will depreciate by 50 percent over the next four years, calculate the annual cost of depreciation given her present buying habits. Now calculate the annual cost of depreciation under the proposed change. Assume the market value will depreciate by 55 percent over the next five years. What is the annual cost savings? What is the cost savings over the five-year holding period?

2. What other factors should Ann Barnard consider before she changes her buying behavior?

Ann Barnard typically buys a new car and trades in her old one every four years. Because new cars are so expensive, recently she has considered changing her buying habits. She would like to know how much she might save in depreciation costs if instead she purchased a new car every five years.

2. What other factors should Ann Barnard consider before she changes her buying behavior?

Ann Barnard typically buys a new car and trades in her old one every four years. Because new cars are so expensive, recently she has considered changing her buying habits. She would like to know how much she might save in depreciation costs if instead she purchased a new car every five years.

## Answer to relevant Questions

The Reeds are considering the purchase or lease of a $20,000 car. They have used the worksheet shown in Figure 7.4 to evaluate the relevant costs. They estimate that the initial expenses for leasing are $1,000 and the ...Given an affordable monthly mortgage payment of $650 and a mortgage interest rate of 9 percent on a 30-year loan, what is the size of the affordable mortgage? Given this affordable mortgage, and a 10 percent down payment, ...A lender is offering an 11 percent fixed rate mortgage, requiring a down payment equal to 20 percent of the home’s purchase price. The lender estimates that closing costs should be equal to $500 plus four points. How much ...1. On a scale of 1 to 5 (5 representing the highest degree of risk aversion), where do you rank the Steeles? Where do you rank yourself? 2. The Steeles are contemplating opening a stockbrokerage account. Help them in the ...What is a maintenance margin requirement? Assume that you bought 100 shares of Acme, Inc., at $100 a share. If the maintenance margin requirement is 0.30, at what price would your broker give you a margin call? What does a ...Post your question