1.When interest rates are low, some automobile dealers offer loans at 0% APR, as indicated in a 2016 advertisement by a prominent car dealership, offering zero percent financing or cash back deals on some models. Zero percent financing means the obvious thing—that no interest is being charged on the loan. So if we borrow $1,200 at 0% interest and pay it off over 12 months, our monthly payment will be $1,200/12 = $100. Suppose you are buying a new truck at a price of $20,000. You plan to finance your purchase with a loan you will repay over two years. The dealer offers two options: either dealer financing with 0% interest, or a $2,000 rebate on the purchase price. If you take the rebate, you will have to go to the local bank for a loan (of $18,000) at an APR of 6.5%. Should you take the dealer financing or the rebate? (Assume you take the deal that

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Solution1 New Truck price 20000 Option1 0 Interest ... View the full answer