Almost everyone needs to borrow money at some point in their life. For example, your first...
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Almost everyone needs to borrow money at some point in their life. For example, your first borrowing experience might be to take out a loan to pay for your dream car. As you get older, you might borrow money to pay for your wedding or a house, or to start your own business. Other than student loans, almost everything you want to borrow money for requires you to have a "credit." The better your credit history/score is, the lower interest rate you will get from the lender'. You might not realize this, but writing checks and having a credit card actually help you build credit. Of course, you want to always pay off the bills on time and make frequent payments to ensure a high credit score. Let's suppose you want to buy a brand new car with little cash up front. One way to do this is to finance. In this problem, you will explore the price of a car that you can comfortably afford. a) Suppose you plan to finance a car for 5 years with a 3.14% interest rate, compounded monthly. First determine how much you are comfortable in paying each month and how much down payment you want to put down. Explain the rationales behind your choices. b) Let's assume your down payment will more or less cover the additional costs of buying a car (e.g., sales tax, license fee, registration fee, closing cost, etc.). Find the largest purchase price you can afford. Be sure to show and discuss your work. c) Find a new car on TrueCar.com that matches with your answer in part b) and describe any factors you used to arrive at your final choice. If this was hard, discuss how you can adjust any of the factors considered in your decision-making process to make this easier. Be sure to justify why your adjustment works. Almost everyone needs to borrow money at some point in their life. For example, your first borrowing experience might be to take out a loan to pay for your dream car. As you get older, you might borrow money to pay for your wedding or a house, or to start your own business. Other than student loans, almost everything you want to borrow money for requires you to have a "credit." The better your credit history/score is, the lower interest rate you will get from the lender'. You might not realize this, but writing checks and having a credit card actually help you build credit. Of course, you want to always pay off the bills on time and make frequent payments to ensure a high credit score. Let's suppose you want to buy a brand new car with little cash up front. One way to do this is to finance. In this problem, you will explore the price of a car that you can comfortably afford. a) Suppose you plan to finance a car for 5 years with a 3.14% interest rate, compounded monthly. First determine how much you are comfortable in paying each month and how much down payment you want to put down. Explain the rationales behind your choices. b) Let's assume your down payment will more or less cover the additional costs of buying a car (e.g., sales tax, license fee, registration fee, closing cost, etc.). Find the largest purchase price you can afford. Be sure to show and discuss your work. c) Find a new car on TrueCar.com that matches with your answer in part b) and describe any factors you used to arrive at your final choice. If this was hard, discuss how you can adjust any of the factors considered in your decision-making process to make this easier. Be sure to justify why your adjustment works.
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Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date:
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